How long before economic reality reasserts itself in the housing market? Perhaps not too long, according to some of the indicators in the latest survey from Hometrack.
Prices rose by 0.2% in September and the annual rate of decline fell to -5.6%, according to the market information company. The percentage of the asking price being achieved rose again to 92.4% and the percentage of postcode districts with a price increase rose again to 15.2%.
But that still leaves 85% of the country where prices are unchanged and the survey also showed a slowdown in some other lead indicators. While the number of new buyers registering with agents is still rising, the rate of increase has slowed significantly in the last two months.
Hometrack director of research Richard Donnell said the national growth was largely the result of prices in London and the South East being propped up by a shortage of quality homes for sale - a situation set to continue for the rest of the year.
Backing for that view comes in the latest survey of prime London house prices by Knight Frank. Prices rose 1.3% in September and are up almost 9% in the last six months in areas like Kensington and Chelsea. That’s put down to strong demand from cash-rich UK and foreign buyers and a supply that is still 50% down on two years ago.
‘Outside southern England the lack of supply is less pronounced and it is a modest pick up in sales and improved market sentiment that is supporting prices to the point where they have been tracking sideways,’ says Donnell.
He argues that a sustainable housing market recovery cannot be built on the back of price rises driven by a short term imbalance between supply and demand. ‘Question marks remain as to how long this situation can last and how resilient the market will be to changes in both levels of demand and sentiment.’
Rising unemployment and a continuing shortage of mortgages will act as a drag on demand, he says, while tax increases will reduce disposable incomes. Any increase in supply from sellers in response to the recovery so far will also put the brakes on.
First boom, then bust, then false dawn, then stagnation?
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