Some positive signs for Autumn market including start of London recovery
- A monthly rise of 0.7% (+£2,088) in the price of newly-marketed property matches the average for September since 2011, though the annual rise remains muted at 1.2%
- Autumn market has stronger momentum in areas with better affordability and sentiment, with Wales, East Midlands, West Midlands and Yorkshire & the Humber all recording average annual price rises of at least 4%
- After years of price falls in parts of London there are signs of renewed buyer activity at the upper end, with a 6% rise in number of sales agreed for homes of £750,000 and over compared to same month last year
- ‘Back to school’ season offers more choice for buyers, with a 16% jump in new properties coming to market in the first week of September compared to the average of the final three summer weeks
The price of property coming to market has risen by a national average of 0.7% (+£2,088) this month, which is the same as the average monthly increase in September of 0.7% since 2011. The national annual rate of increase remains muted at 1.2%, but there are some positive signs for the Autumn market in regions where affordability and sentiment are good, although stretched buyer affordability or negative market sentiment in other regions are limiting price growth. Substantial price reductions in some parts of the London market over the last two years are now helping to improve sentiment and momentum, with renewed buyer activity evident at the upper end.
Miles Shipside, Rightmove director and housing market analyst comments: “Buyer affordability has been increasingly stretched by seven years of national average property price rises outstripping buyers’ average wage inflation. However in London, after asking prices rose by over 50% between 2011 and their peak in 2016, there have been two years of subsequent price falls in parts of the capital. Now, there are signs that these price reductions in parts of London have led to an upturn in buyer activity as sentiment improves.”
Less stretched buyer affordability and positive market sentiment have helped to buoy some regions to attain average annual rises of at least 4%: the East Midlands (+4.7%), Wales (4.6%), West Midlands (+4.5%) and Yorkshire & the Humber (+4.0%). Conversely, there have been year-on-year price falls in the North East (-1.1%), London overall (-0.5%) and the South East (-0.1%), with the East of England just reaching positive territory at +0.3%.
Shipside observes: “Buyer affordability ratios were not stretched to the same degree in the Midlands and the North than they were in the South, with a comparatively modest average price increase of 21% since 2011. That’s left some price momentum fuel still in the tank in these regions, and means that the current momentum has the mileage to carry on into this Autumn. That compares to the seven-year 40% plus price binge seen in London and its commuter belt neighbours of the South East and East of England, which is the cause of their current indigestion.”
The upturn in London’s buyer activity this month is in the upper end of the London market, above £750,000, comprising around a fifth of all transactions in London. The number of sales agreed above £750,000 is up by 6.0% on the same month a year ago, while below £750,000 it is down by 3.6%. Average asking prices in Inner London peaked in February 2016 at £823,000, and are now £756,000, which has helped with the increase in buyer activity.
Shipside says: “It’s been a hard and rocky road to recovery at the upper end of the London market, taking two successive years of price falls. London is a barometer and sometimes a catalyst for rises and falls in the rest of the UK housing market. The recovery in the upper end is encouraging but the painful and drawn-out process of price reductions has yet to run its course especially in parts of Outer London and the commuter belt that saw very sizeable and unsustainable price rises. More sellers and agents will need to re-adjust their expectations to be in line with what buyers are willing or able to pay, as it seems that buyers are out there if the price is right.”
Autumn traditionally sees a boost in activity and this will be fuelled by more choice for buyers with a 16% jump in new properties coming to market in the first week of September compared to the average of the final three summer weeks.
Shipside notes: “The start of the ‘back to school’ season sees a surge of sellers coming to market compared to the preceding quieter holiday period. Sellers aren’t hanging back in coming forward to try and sell, and with average prices just 1.2% higher than a year ago, many seem to be pricing sensibly.”
Joseph Robinson, Director for Stirling Ackroyd in London, says: “It’s of no surprise to anyone that the sales market in London has been tough over the past 12 months, however over the past few months we’re seeing positive signs of improvement within the sector. Not only have we just had a record July and August with regards to properties exchanging contracts, we’ve also seen a rise in sales being agreed across our offices, with an increase of 62% over the past two months alone. It has been occurring for years, but the London market really is shifting East. The applicants viewing with us are majority first and second-time buyers, but there has been a large rise in applicants at the upper end of the market not only viewing, but also purchasing. We feel confidence is returning to the London market after a long hiatus.”
Geoff Wilford, Founder of Wilfords Estate Agents in London, says: “We’re certainly seeing renewed buyer activity with sales enquiries up 15% in comparison to this time last year and sales agreed up 10%. Prices in central London have softened by 15% since the peak of the market in 2014. Buyer enquiries are up with a number of people believing now is a good time to buy when other people are selling. I’m of the firm belief that when the pendulum swings back from being a buyer’s market to a seller’s market the current levels of pent up demand will result in a price increase, as was witnessed back in 2013. In my opinion the smart money is buying now.”