Wary House Buyers Slow Price Appreciation
House price growth slows as potential house buyers are put off by over inflated prices.
A new report issued by Hometrack shows that house price appreciation has slowed to its lowest level since February 2013. House price inflation rose by just 0.1% between June and July, descending from the already low rate of 0.3% between May and June.
Furthermore London, the housing market hotbed that has in large part been responsible for pushing up the national average housing price, only registered price increases in 12% of its boroughs.
East Anglia showed the most rapid rate of house price appreciation, though the 0.5% increase displayed there can not exactly be considered rampant. Prices in the East, West Midlands and North West went up by 0.2%, while house price inflation in the South West was only 0.3% in July.
Hometrack’s July National Housing Survey, based on a poll of estate agents across the UK, also showed that less than a quarter of areas across the country experienced a rise in house prices, compared to 50% last month. Demand is also slowing, with the amount of new buyers registering with agents decreasing by 0.9%. The fact that the level of demand has moved in to negative figures shows that the gap between supply and demand, which was primarily responsible for the upward pressure on house prices, has significantly narrowed as of late.
The report also points to other distinct signs that the market is cooling. Decreasing demand is resulting in less and less people achieving quick house sales or being able to sell a house for the initial asking price. While the national rate has only increased slightly, the average time people looking to sell property in London are spending on the market has increased markedly in the past three months. Also, the amount of house buyers across the UK paying the vendor’s asking price has dropped by 0.7% since May.
Repeatedly proffered warnings of a housing bubble, nervousness over the immanence of interest rate rises, stricter lending criteria that constitute part of the new Mortgage Market Review legislation and a general decrease in house buyer confidence have all contributed to the noticeable cooling of the market indicated by the collective statistics.
Director of research at Hometrack, Richard Donnell, said:
“The lead indicators in the survey have pointed to a slowdown in the rate of growth for the last two months, in part due to warnings from the Bank of England and others of a possible house price bubble. Demand for mortgages has also been slowing for several months now. There’s a growing element of caution from buyers about the market outlook as the prospect of future interest rate rises looms, and the new tougher mortgage market checks implemented as part of the Mortgage Market Review impact on demand.”
While it should be noted that average national house prices are not yet beginning to depreciate, there is a distinct and seemingly continuous pattern of downward pressure on house price growth, particularly in London and the South East, the areas upon which the most acute fears of a housing bubble were focussed.
Many analysts believe that, especially in London and the South East, this slump in house price growth indicates an ongoing trend, rather than a flash in the pan. Grainne Gilmore, head of residential research at Knight Frank, said:
“This is not a short term blip. This latest survey shows us the direction of travel for London and the south-east.”
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