Housing market in ‘delicate balance’
A further asking price rise of 0.3% in July reflects growing seller confidence, thereby creating upward pressure on house prices in England and Wales. Furthermore Greater London led the way as July’s prices jumped by 2.3%, shrugging off a weak performance in Q2.
"But can the market take it?" asks Doug Shephard, business development director for Home.co.uk.
Affordability constraints have led to "a delicate balance in a highly price sensitive market," reveals the latest Asking Price Index report from Home.co.uk.
According to the report, "High asking prices around September 2004 proved to be out of reach for many buyers," causing a, "40% reduction in the number of property transactions over the months that followed." To get the market moving again in 2005, sellers had to cut their prices. Subsequently, even small rises in asking prices have caused a slow-down in property sales.
"Many sellers are having to moderate their expectations to achieve a sale within a reasonable time-frame," commented Doug Shephard.
The report gives an insight into asking and sale price trends in Greater London, from the height of the boom in 2004 to the present. Due to the market’s extraordinary, upward momentum, sale prices registered in July 2004 were only around 80% of the value of asking prices. Over the last two years, the sale price to asking price ratio steadily increased to around 93% by May 2006, closing the gap between sellers’ aspirations and buyer demand.
Throughout this period, as asking prices became more approachable, buyers returned to the market, slowly pushing sale prices upwards. Such a convergence of asking and sale prices signifies an end to the speculative, selling practices that stalled the market in late 2004/5 and a return to more balanced market conditions.
Looking to the rest of the country, the report shows East Anglia and the North to be the worst performers of England’s nine regions and seem in no fit shape for price rises in the near future. Over the last twelve months, their prices have slid by 6.0% and 4.1% respectively. The Yorkshire and Humberside region is the only one in England and Wales to show an overall asking price increase (2.2%) since July 2005. Meanwhile, Scotland heads for the heights with an astonishing, meteoric rise of 16.1% over the same period.
Looming over the current, price sensitive trends in England and Wales is the spectre of higher interest rates. The Home.co.uk report points to changes in the supply of credit as the chief determining factor governing future house prices. Interest rate hikes in the US and the Eurozone have already occurred but, so far, their bark has been worse than their bite for UK borrowers with the Bank of England, as yet, refusing to follow suit even with inflation meters moving into the red.
Perhaps the greatest pressure on the supply of credit will come from the Bank of Japan. After a five year, global lending spree, aimed at lifting their beleaguered economy off the deflation ropes, the BoJ has raised their rates from zero. As Japan is the world’s biggest creditor nation and the second largest economy, the knock on effects for a heavily indebted UK are unlikely to go unnoticed.
A further asking price rise of 0.3% in July reflects growing seller confidence, thereby creating upward pressure on house prices in England and Wales. Furthermore Greater London led the way as July’s prices jumped by 2.3%, shrugging off a weak performance in Q2.
"But can the market take it?" asks Doug Shephard, business development director for Home.co.uk.
Affordability constraints have led to "a delicate balance in a highly price sensitive market," reveals the latest Asking Price Index report from Home.co.uk.
According to the report, "High asking prices around September 2004 proved to be out of reach for many buyers," causing a, "40% reduction in the number of property transactions over the months that followed." To get the market moving again in 2005, sellers had to cut their prices. Subsequently, even small rises in asking prices have caused a slow-down in property sales.
"Many sellers are having to moderate their expectations to achieve a sale within a reasonable time-frame," commented Doug Shephard.
The report gives an insight into asking and sale price trends in Greater London, from the height of the boom in 2004 to the present. Due to the market’s extraordinary, upward momentum, sale prices registered in July 2004 were only around 80% of the value of asking prices. Over the last two years, the sale price to asking price ratio steadily increased to around 93% by May 2006, closing the gap between sellers’ aspirations and buyer demand.
Throughout this period, as asking prices became more approachable, buyers returned to the market, slowly pushing sale prices upwards. Such a convergence of asking and sale prices signifies an end to the speculative, selling practices that stalled the market in late 2004/5 and a return to more balanced market conditions.
Looking to the rest of the country, the report shows East Anglia and the North to be the worst performers of England’s nine regions and seem in no fit shape for price rises in the near future. Over the last twelve months, their prices have slid by 6.0% and 4.1% respectively. The Yorkshire and Humberside region is the only one in England and Wales to show an overall asking price increase (2.2%) since July 2005. Meanwhile, Scotland heads for the heights with an astonishing, meteoric rise of 16.1% over the same period.
Looming over the current, price sensitive trends in England and Wales is the spectre of higher interest rates. The Home.co.uk report points to changes in the supply of credit as the chief determining factor governing future house prices. Interest rate hikes in the US and the Eurozone have already occurred but, so far, their bark has been worse than their bite for UK borrowers with the Bank of England, as yet, refusing to follow suit even with inflation meters moving into the red.
Perhaps the greatest pressure on the supply of credit will come from the Bank of Japan. After a five year, global lending spree, aimed at lifting their beleaguered economy off the deflation ropes, the BoJ has raised their rates from zero. As Japan is the world’s biggest creditor nation and the second largest economy, the knock on effects for a heavily indebted UK are unlikely to go unnoticed.
posted by tony at 6:28 PM
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