Increased supply weighs heavy on southern prices
A surge in new instructions has swelled estate agents’ portfolios further, according to Home.co.uk’s Asking Price Index for September.
However, given the large number of properties entering the market last month, the current total of stock for sale has only increased by a comparatively small margin. Hence, demand remains sufficiently strong to have prevented a large glut of unsold properties.
Vendors are clearly motivated given that, seasonally, prices usually dip from here towards the Christmas break. The drop in the bank rate will have been the green light for many vendors to commit, but a substantial and growing landlord exodus has also been observed.
Of course, higher stock levels put downward pressure on prices. The last time the total stock of unsold properties on the market was this high was in 2019 and that year prices essentially went sideways (despite the base rate being a mere 0.75%).
For the time being, it is reassuring that the rate at which properties are moving through the market is considerably higher than in 2019, although given the recent uptick in inflation (and the Bank of England’s poor track record on forecasting), this may not be the case for much longer. Buyer optimism could evaporate very quickly should monetary inflation be found to be out of control again.
Overall, a two-speed market persists. The northern regions of England, the West Midlands, Scotland and Wales show all the indications of vibrant markets with price growth over and above inflation. The North East, in particular, is racing ahead and has shown very strong price growth over the last twelve months.
Elsewhere, prices have essentially stayed still this year and certainly have not yet recovered their 2022 highs.
The East of England and Greater London still have the most ground to make up before they return to the 2022 price highs.
Meanwhile, the East, South East and the South West still have a few percentage points to recover. Given the high stock levels in these regions, we expect further recovery to remain very slow. Indeed, a further rate cut may be needed to elicit significant price growth through greater demand.
Despite the poor prospects for price growth in some regions, the UK property market is operating within normal parameters and could step up a gear next year if borrowing costs continue their steady decline.
However, the risk of a further bout of inflation, tax increases and rent controls all continue to be dark clouds on the housing market horizon.
The annualised mix-adjusted average asking price growth (sales) across England and Wales is now 1.5%; in September 2023, the annualised growth of home prices was -1.8%.
