The housing market’s traditional September “back-to-school” pick-up has been slow to materialise as demand from buyers remains low and as vendors’ asking prices remain over-ambitious.
But new figures this week suggest that the UK residential property market may be flat, rather than falling outright. On Thursday, the Nationwide House Price Index posted an 0.1 per cent gain for the month, following a fall
of 0.8 per cent in August.
While September is normally a busy month as people ponder moving home after their summer holidays, estate agents say activity has only improved slightly from August.
“It’s been a little bit busier so I’m more optimistic than I was,” says Ed Mead, commercial director at London-based estate agency Douglas & Gordon.
Liam Bailey of Knight Frank agrees. “Over the summer, there was generally a view that the economy was going to head downwards, that austerity was going to bite,” he says. “In reality, September hasn’t been that bad.”
According to Knight Frank, while the volume of exchanges taking place in London and the south-east fell 16 per cent in September from the previous month, the number of properties that went under offer increased by 31 per cent.
“We had a difficult period of getting things under offer in May, June and early July,” he explains. “But at the moment we’re seeing quite a lot of
activity coming through which means exchanges should start to rise quite strongly over the next few months.”
However, demand from buyers has fallen across the UK. On Monday, the latest house price index from Hometrack showed a drop in demand of 2.9 per cent
in September, the third month in a row that demand has fallen. In contrast, the number of new properties coming onto the market for sale rose by 1.2 per cent.
Agents say that the widening gap between supply and demand has led to an increase in the average time a property is on the market, to 9.3 weeks in September – the highest level for over a year.
“There are some properties which have been on the market for a long while,” says Richard Hatch of Carter Jonas.
A key reason is that many sellers are still being too ambitious in their asking prices, agents say.
“Vendors are not giving an inch and buyers won’t be pushed, so it’s becoming difficult to do deals,” explains Robin Chatwin, head of Savills’ Wandsworth office, often seen as a bellwether location for the affluent, family-oriented domestic market.
Only in a few key locations in prime London, where international buyers remain active, are buyer and seller expectations still closely aligned.
Madelaine Lundgren of King Sturge in Knightsbridge says September has seen a number of transactions taking place in prime central London. “The weak sterling continues to attract buyers from overseas, with 80 per cent of our sales being driven by south-east Asia,” she says.
However, the housing market in the south-west of England has slowed down significantly. Jonathan Cunliffe, head of Savills’ Truro office in Cornwall, says properties sold at the peak of the market – in 2007 or autumn 2009/spring 2010 – were sold over and above the fair market price, at a premium. But prices have not yet lowered to reflect the new reality. “I think most agents would agree that most of the property currently for sale on the UK market is overpriced, rather than fairly or accurately priced. Buyers will just not swallow that anymore, which is why the transaction numbers are falling,” says Cunliffe.
He says he has recently valued properties for potential clients, not been instructed, and has then seen the property launched on to the market some weeks later at a 40 per cent or even 50 per cent premium to his valuation.
“It’s taking sellers some time to grasp this shift and it could take weeks or months for the market to stabilise, and for buyer and seller expectations to realign,” he says.
But estate agents say some more realistic vendors are lowering prices. Mead believes some are reducing prices by as much as 10
per cent, while Knight Frank says the proportion of the asking price being achieved in London and
the south-east dropped from a high of 98 per cent in
July to 93 per cent in September.
Trevor Abrahmsohn, managing director of Glentree International, says that, as a result, slightly more activity has taken place than normal.
“In London, I think asking prices will ease, leaving underlying value untouched. I do not see any deterioration in prices where there is not an unsual stock overhang,” he says.
However, analysts say that other parts of the UK will not fare so well because of the upcoming public sector cuts.
Agents say that fears over what the Con-Lib coalition government’s comprehensive spending review on October 20 might contain is already stalling buyer activity.