Supply increase sees prices go off boil
1:55pm Monday 7th July 2014 in News
FOLLOWING substantial increases in the price of property coming to market over the first five months of 2014, June saw a marked change with prices reach at a virtual standstill.
The average rise in new seller asking prices is just 0.1 per cent (+£272), and while demand usually cools over the summer months, this marginal increase is below June’s 0.6 per cent average over the last ten years according to housing market analyst Miles Shipside.
He says: “Regions have seen falls rather than rises during this month. and all the fallers are in the north, with the notable exception of London, which records a drop of 0.5 per cent.
All regions have seen an increase in supply as more people decide to try to sell, the capital has seen a rush of new sellers.
"The demand and the flow of extra property choice for buyers coincides with the somewhat chaotic implementation of the new Mortgage Market Review (MMR) and its tighter lending criteria.
"Through luck or judgement It appears that the timing of the Mortgage Market Review, more property for sale in all regions, and a tail-off in pent-up buyer demand are alleviating some of the upwards price pressure. This will come as a relief to the Governor of the Bank of England and the Financial Policy Committee, who have cited an over-heating housing market as a serious threat to economic recovery and have further powers to use should it get out of hand.
There are early signs of upwards price pressure being reduced by a better, albeit belated, balance between supply and demand.
Those buyers who are the first to react to an upturn often have nothing to sell, and there is a time-lag before existing home-owners are ready or able to commit to trade up, down or out in the marketplace."
Better selling conditions in the first half of this year and increased confidence to take on the commitment of moving has finally unlocked more supply with new seller numbers up by an average of 9.6 per cent year-to-date compared with 2013.
All regions have also recorded a month-on-month increase in properties coming to market, with the capital seeing the largest jump in new sellers, up by 23.2 per cent.
Combined with the increase in supply, there are early indications of a slowdown in demand.
The summer months traditionally see a drop-off in buyers, and this year it seems that the initial rush of pent-up buyer demand has started to slowdown, as many motivated and committed buyers have now completed their transactions.
The tighter lending criteria introduced under MMR have also dampened demand, though it remains to be seen whether its clumsy implementation will result in only a temporary lull in mortgage approvals rather than a substantial permanent downturn.