Olympic Games affected property market, UK’s biggest estate agency believes
20-09-2012
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The sporting event is blamed by Rightmove for resulting in a property prices falling between August and September in England and Wales. Its latest index shows that average asking prices were down by 0.6%, the third consecutive monthly fall in a row. The average price of a property coming to market this September is virtually unchanged on a year ago at £234,858, up 0.7% and the index also shows that prices have remained much the same since the crash of 2007 when the average price was 235,176, a difference of just 0.1%.
In contrast average asking prices in previous five years (Sep 2002 to Sep 2007) saw a 55% rise. Prices have fallen over most of the country with the exceptions being a 4.3% rise in asking prices in East Anglia and a 0.3% rise in Greater London. Elsewhere average asking prices have fallen, most notably by 2.3% in the North and by 2% in the North West. ‘Summer sellers have had some very stiff competition, not only from competing sellers chopping their prices but also from the Olympics extravaganza which has been more compelling for many than viewing property.
Property coming to market is £11,000 cheaper than it was three months ago and there will be many hoping that this gives a boost to the autumn selling season if buyers leave their starting blocks in a hurry and join the traditional rush to see in the festive season in a new home,’ said Miles Shipside, housing market analyst at Rightmove. He pointed out that September 2011 saw sellers increase their prices by 0.7%, so this year’s fall of 0.6% is a marked turnaround in pricing tactics, especially with estate agents keen to attract fresh stock to showcase after a summer holiday slowdown exaggerated by the Olympics and Paralympics. He added that this year’s extended summer selling recess has perhaps delayed the onset of any autumn flurry which might have pushed up sellers’ pricing confidence.
The net result is that prices are now virtually the same as September last year, up by just 0.7% (£1,719), and market conditions remain very similar. ‘In truth, the state of the housing market is little different now to this time last year, and prices have stagnated as neither buyers or sellers have been forced to change their behaviours in sufficient quantities to stimulate greater activity. However, back in 2007 few would have believed that house prices would still be the same in five years’ time. This would have been in the context of the previous five year period to 2007 seeing an average rise of 55%,’ he said. ‘Equally hard to predict would be the extreme changes the housing market has undergone. The global squeeze in the credit markets has seriously affected the man on the street’s access to mortgage financing, permanently hampering their ability to finance their journey onto and up the housing ladder,’ he added. While the average new sellers’ asking price in the UK has remained virtually the same since September 2007, market conditions are much changed, he also pointed out.
They are patchy, localised, and vary markedly for the many different buyer and seller segments. Winners include home owners in London and the south. New seller prices in London have outperformed every other region over the last five years, up by 18.7%. The remaining regions in the south, that is East Anglia, South East and South West, are all in positive territory. England and Wales as a whole has fallen by 0.1% over the same period, with all of the northern regions in negative territory. ‘Demand has held up better in the south and has outstripped supply in many localities. In London in particular, property owners have seen their housing assets increase in value and been clear credit crunch winners,’ added Shipside. Cash rich buyers and buy to let investors have also benefitted, he believes. ‘Many of the equity blessed are situated in the south, and their markets are closest to returning to pre-credit crunch supply.
The number of sellers willing or able to come to market in London, the South East, East Anglia and the South West are the highest of all regions in England, recovering to within 14% to 20% of 2007 levels. New seller numbers in other regions are down by an average of 26%,’ he explained. ‘Some buy to let investors who bought property in the run up to the credit crunch have seen a fall in capital values, but many have been rescued by the rise in rents and a reliable income stream driven by high tenant demand,’ he added. Those who have lost out include the so called trapped renters. Over half of existing renters state they would like to buy but cannot afford to. ‘The inability of the majority of tenants to move out of the rented sector leaves fewer vacancies for the fresh crop of households being formed, who are also struggling to buy.
This demand pushes up rents, so tenants lose by not being able to get onto the housing ladder and end up paying more for living where they do not wish to be,’ said Shipside. There are also those who are regarded as being mortgage prisoners, that is people in negative equity or with insufficient equity to fund their next move. ‘With property prices in the doldrums, the equity of many existing home owners has been eroded and, with lenders demanding higher deposits, those affected are unable to escape from their restrictive mortgage predicament’ added Shipside. Although virtually no movement in house prices since 2007 may sound not so bad at first glance compared to many other asset classes given the wider economic backdrop, it is not necessarily something to boast about, according to Nick Hopkinson, director of property company, PPR Estates. ‘If you take into account inflation which has been compounding at over 3% a year, house prices have fallen more than 14% in real terms over the last five years since Northern Rock kicked off the global credit crunch,’ he said.
‘In fact, if you also strip out the distorting effect of houses in London’s millionaire enclaves then the falls are more likely 25% plus for most areas of England and Wales in real terms. With the credit crunch still in full swing and inflation still roaring ahead of all official targets house prices are very unlikely to recover anytime soon for most of us,’ he added.
