In a period when the shortage of housing stock is one of the top subjects for discussion in the property market, it could be surprising to hear that oversupply is causing a drop in prices – but that’s one of the conclusions of a recent report by Home.co.uk.
According to the company’s ‘s House Price Index for November, even the formerly top-performing northern regions are now showing sub-inflation growth, with the key driver of property sales, the buy-to-let investment market, affected by negative capital gains in real terms and rents sliding
The poor state of the wider economy, with rising unemployment and the expectation of tax rises in the November budget, will also erode the number of potential buyers and their buying potential, according to the report. The market will have to adjust to these new circumstances by reducing prices and rents.
Home.co.uk says that some property investors, looking at the poor near-term prognosis for UK property, are already ‘throwing in the towel’.
The report predicts that heading towards Christmas, vendors can expect offers to come in below the asking price as buyers increasingly have the upper hand.
Mortgages
There may, though, be more reason for optimism regarding mortgage rates. A cut in the Bank of England base rate is expected, and with reforms to inheritance tax, capital gains tax, property tax and pensions on the table in the Budget, many buyers will likely hold off, adding to a market slowdown. With inflation still running well above the Bank of England’s target rate, only the smallest cut in the base rate is expected.
While house prices continue to rise, this rate is outstripped by inflation, with even the best-performing regions suffering losses of capital value in real terms, and a glut of unsold stock on the market, with the total portfolio count for England and Wales at its highest November reading since 2013 – so oversupply is rebalancing the market in favour of buyers. Vendor numbers have risen considerably, with the highest number of new instructions for October in many years, suggesting that investors are selling up.
Yorkshire remains top of the regional property market with a year-on-year gain of 3.2 percent, while the South West remains the worst regional performer with a decline of 1.3 percent, outpacing London’s annualised decline of 0.9 percent.
Negative
Sales momentum is plummeting after a record-breaking summer, with typical Time on Market (TTM) for unsold properties trending higher, currently eight days more than in November last year. Growth in asking rents has slidden further into the negative (now -3.7 percent), with all English regions, Scotland and Wales indicating year-on-year falls in asking rent. The trend is different in London, where according to Home.co.uk, 18 of the 33 London boroughs indicate positive asking rent growth.
