London property prices are suffering
According to the data, the new average marketing price of a property in the UK is now £305,732 which is 0.3% higher than the previous highest average of £304,943 which was observed in July 2017.
Of course, an asking price is just that – an asking price – and therefore it’s also important to view this metric in context to prices which are actually being achieved.
Rightmove claim that currently, on average sellers are achieving 96.7% of their asking price, which reflects recent reports from other sources, such as the report released by the Royal Institution of Chartered Surveyors last week, that stocks of existing properties for sale are still dragging along at record low levels in many parts of the country, meaning that in many towns and cities it’s still very much a seller’s market.
This is also illustrated by the regional breakdown in annual price increases, with the North West seeing the strongest annual price increase at 4.3% and the East Midlands experiencing a 4.2% rise last month, whilst other regions such as Yorkshire & the Humber, the South West and Wales all saw annual asking price increases 2.7%, 2.6% and 2.4% respectively over the same period.
At the other end of the scale, however, the environment in London continues on the decline, with average asking prices down again over the last month, and the average time taken to secure an offer on a property over seventy days, which is significantly longer than other better performing regions, such as Scotland, the East Midlands and South West, all of which are currently seeing sales agreed on average in fifty-six days or less.
However, whilst strong purchase demand is still evident outside of the Capital, with rising house prices also comes increasing pressure on buyer affordability.
Calls this week from the Bank of England to review the ‘looser credit conditions’ which have meant lower deposit mortgages have been more widely available to borrowers, could mean that we may soon see more difficult lending conditions for those who are stretching themselves to purchase their next home.
With an inevitable affordability ceiling, whilst it’s tempting for sellers in areas of high demand to set an ambitious marketing price, whether that’s actually achievable is another matter entirely.
Home buyers are seeing average asking prices at their highest ever level with upwards price pressure getting stronger the further away you move from London.
Miles Shipside, Rightmove director comments, “Home buyers are seeing average asking prices at their highest ever level with upwards price pressure getting stronger the further away you move from London. However, higher prices stretch buyers’ willingness to pay or ability to afford them.
“In the more popular locations and for the property with the right specifications, buyer demand is helping to push prices higher. A lack of choice is nudging prices up to test the ceiling of what the market will pay.
“It’s not rampant price inflation, and buyers can easily spot a speculative price and ignore a property that is out of line with others nearby and is also likely to be out of kilter with their pocket.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman observes, “What we are seeing is a two-tier market developing – the opposite of what we previously regarded as the north-south divide. This time the North seems to be powering ahead faster than the South, rather than the other way round.
London’s property market especially is in decline
“London property prices in particular are suffering and it is a very different picture from the heady days of a few years ago, as affordability and common sense now prevail.
“Certainly, we are finding that property prices in London need to be competitive in order to stand out but sales are happening where buyers and sellers are more realistic and taking advantage of the opportunities that the change in market conditions has brought. Looking forward, we don’t forecast any drastic adjustment one way or another.”
Brian Murphy, Head of Lending for Mortgage Advice Bureau also cautions, “What our mortgage advisers are seeing at the coalface is not only that properties which are being marketed at an ambitious marketing price are taking much longer to sell, even in areas of high demand, but also that the vendor then opens themselves up to the potential of the property being down-valued at survey stage.
“At the end of the day, buyer affordability can and will only stretch so far, therefore the more circumspect vendors who are pricing realistically are those who are securing a buyer quicker and also have more chance of the deal completing in a timely fashion.”
Of course, it doesn’t take much to reverse the current trend, and if more sellers decide to take the plunge and put their home on the market over the next few weeks, this could tip the balance back in favour of buyers in some overheating areas.
But regardless of market dynamic, if borrowing conditions do become tougher, together with predicted interest rate increases this year, then even in the most popular of areas sellers may need to accept that there is a limit to what they can achieve.