Property supply drops in both sales and rentals
Extraordinary circumstances produce extraordinary market behaviour. Ultra-low mortgage rates combined with a vibrant rental market means that, for many potential vendors, it makes sense not to sell, according to Home.co.uk’s November Asking Price Index.
Moreover, the prevailing Brexit uncertainty creates extra caution among wannabe buyers and sellers, especially in London, hampering even further the supply of sales properties and increasing rental demand. Sales supply is down in most regions but, quite remarkably, so too is the supply of rental properties.
Demand for the limited number of rental properties is pushing up rents across much of Greater London, and our data shows these rent hikes have now spread out into the South East. Yields are rising and, as we predicted, a return to significant growth in average home prices in the capital looks inevitable next year. As rents fundamentally underpin home values, we also present analysis of rental supply both at the national and regional level this month.
Across the UK, home prices are holding remarkably steady overall despite Brexit fears, as the supply drop serves to further support values (and limit the impact of price corrections in post-boom regions like East of England). Of course, the regional level presents a more mixed picture.
Modest but positive growth is still present (albeit waning) in the recently booming northern and western regions (especially Wales) whilst, by contrast, the East of England remains in the grip of a price correction.
The South East has also yet to exit a period of negative growth but rising rents and limited sales supply both indicate that this region will soon follow London on the road to recovery.
Meanwhile, the East and West Midlands property markets are heading into a period of much slower growth. Price corrections look a distinct possibility next year in these regions, although should supply continue to fall, as per London, the damage to home values will be attenuated.
For the time being it’s go-slow even in the UK’s best-performing areas. Pointedly, Wales, the top performer over the last year, now shows growth that is no longer outpacing monetary inflation.
Annualised price growth across England and Wales currently stands at +0.0%; in November 2018, the annualised rate of increase of home prices was 0.6%.