14 Jan 2014
Headlines
- Supply of property for sale being placed on the market tumbles to the lowest level ever recorded by this index
- Correspondingly, the overall total of property for sale has plunged to another all-time low and now stands 38% lower than in January 2008
- Average asking price for England and Wales shows no change from last month but is up 6.2% on January 2013, a new post-crisis high
- Further pressure is being placed on prices in the North of England and Scotland which are recording an average monthly drop of 0.3%
- London again defies the wider market trends, posting a month-on- month price rise of 0.4%. Annual price inflation in the capital now stands at a staggering 14.7%
Summary
Given the seasonal downturn, it is usual for prices to slip month-on-month. When prices hold firm at this time of the year, it is a strong signal that demand is strong and vendors are confident overall. However, a serious threat continues to haunt the market which makes the start of 2014 both daunting and unique. The stock drought not only continues but has worsened again to hit another record low as vendors still hold back from entering the market. The average buyer's choice of property for sale is severely restricted (especially in London and the South East) and is now 38% less than in January 2008. In turn, this severe property drought continues to erode affordability, with annual rises across England and Wales now running at 6.2%, the highest house price inflation seen since the financial crisis. Compare that figure to the current average public sector wage growth of -0.3% per annum.
The Greater London property market continues to be the major force driving average prices upwards, recording inflation of 21.2% over the past five years, with 14.7% in the last twelve months alone. This is welcome news for property owners, but affordability issues are forcing increasing numbers of buyers to remain in the rental market. Elsewhere in the UK, prices were unchanged or fell back marginally in December 2013. Annual price changes in most regions of England and Wales remain positive, although in the North of England and Scotland, house prices are still in decline, reflecting the poorer economic outlook in these areas.
UK's Housing Supply Crisis
The drought of sales stock continues to dominate the UK property market overall, but the degree of shortage and the effect on prices varies considerably from region to region. In sought-after locations, good quality properties are being snapped up by eager buyers within days of reaching the market, and this is reflected in the reduced marketing times. The typical time on market across the UK has fallen by 9% in the last two years and can be as low as 82 days in a very active market like London. Moreover, hotspots within the Greater London market, such as Kennington, have seen the typical time on market drop to 69 days or less over the last year.
However, it is at this point in the cycle that the property market begins to struggle, as current home sales are not being replaced with equivalent numbers of fresh stock. There are fewer new properties entering the market in every region of England, Wales and Scotland, with overall volumes last month down 7.5% on last year, and a staggering 57.2% down on five years ago. London and the South East are most affected by the shortage crisis, with falls in new stock of 67.5% and 61.0% respectively over the last five years.
Market Turnover Weakens
With such low volumes of sales stock, the market turnover is being squeezed even further, with negative knock-on effects for many people and businesses. Home.co.uk tracks the flow rate of properties moving through the market by combining monthly data on overall stock levels and average marketing times. This Home Market Turnover Indicator (HMTI) has also dropped to a new low, with only an average 1,890 properties passing through the market on a daily basis. This is 21% down on January 2013 and a world away from the boom of 2007 when the HMTI was as high as 10,000 properties per day.
London's Swelling Bubble
Prices in the capital continue to defy both the wider UK market and seasonal trends. Another rise of 0.4% since December means that London has now recorded 13 consecutive months of monthly price growth. This translates into 14.7% annual price inflation, which places the Greater London area firmly in the property bubble category. Fuelled by relentless demand and dwindling new stock (down 67.5% compared to five years ago), London property values are set to rise much further (an average price increase of 20% during 2014 is likely).
Doug Shephard, Director at home.co.uk, commented:
"Absolute demand has clearly not returned to pre-crisis levels across the UK. However, when we look at current demand relative to the current level of supply, the impact on affordability is probably worse.
Government policy to date has served to stimulate demand and has done relatively little to improve supply. Add to this scenario the increasingly polarised nature of the UK housing market and we have a very volatile situation. The record low volumes of stock and the consequent restriction in market turnover are really beginning to bite hard in a growing number of areas. What is increasingly clear is that the UK's housing shortage that has been brewing for the past thirty years is now reaching the point of crisis.
Housing is a basic human need. Boom- bust economics serve only speculators and ballot boxes, and are a wholly inappropriate modus operandi for this vital service sector. The supply issue must be addressed now in order to have a balanced and sustainable housing market. In order to do that, the UK requires more homes (built and brought back into use*), and for landlords to be taxed and scrutinised like any other business.
Until vendors return to the market in considerable volumes (and this may only happen when the seemingly inevitable bust recurs), prices will continue to be supported and home hunters will become increasingly frustrated and disheartened about their housing options."
Source: Home.co.uk Asking Price Index
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Contact details and further information
For media enquiries please contact:
Andrew Smith
andrew.smith@home.co.uk
0845 373 3580