The Ups and Downs of Houseprices

Richard Donnell, Director of Research for Hometrack delves into the latest houseprice data in Young Group’s latest London Update.

House price rise continues but 2010 gets off to a slow start…House prices rose by 0.3% over February, but Hometrack caution that price rises alone are not indicative of strong foundations as the 2010 housing market gets off to a slow start.

February is traditionally a month when the Hometrack survey registers significant growth in the number of sales agreed – over the last eight years the growth in sales agreed over February has averaged 30%. Yet this year the number of sales agreed has averaged just 10%.

While it is important to not read too much into one month’s set of figures, the survey also reveals below average increases in both the amount of new housing for sale and new buyer registrations.

The supply of homes for sale may have grown by 4.6% but the average increase over the same month in previous years has been 14%. Buyer registrations have increased by 8.3% this month compared to an average of 24% in the same month over the last 8 years.

Despite the broad evidence of sluggish market activity, price pressures are feeding through more strongly than was the case in the second half of 2009. Average prices are up 0.3% over February and by 0.4% in the last 12 months – the first year on year rise since March 2008. The survey also shows that prices have risen across 25% of postcodes – to a level not seen since 2007.

Greatest upward pressure on prices is in southern England…

January saw a decline both in the number of new sales agreed and in buyer registrations – the average time to sell posted its first monthly increase for 12 months, growing to an average of 8.6 weeks.

Southern England continues to see the greatest upward pressure on prices with average values in London up by 0.7% in the month – the highest monthly increase in the capital since June 2007.

Imbalance between supply and demand continues…

The strong end to 2009 saw growth in sales volumes running well ahead of new supply coming to the market for sale.

Over the last six months of 2009 the supply of homes for sale grew by just 1% while sales volumes increased by 20%. Many agents have started 2010 with a smaller order book than they would like.

While the supply of housing for sale has grown by 6% over February there is a real need for agents to win more instructions to satisfy the expected increase in demand over spring.

The proportion of the asking price being achieved has risen from 88% 12 months ago to 93.8% today and agents seem willing to push asking prices further to test the market.

The proportion of the asking price has bounced back over the course of 2009 from a low of 88% in February 2009. This measure has now reached 93%, and is starting to plateau in the face of firmer pricing and reduced sales volumes.

A shortage of properties for sale has supported prices over the last 12 months but there is a danger that the pressure to gain instructions may result in the gap between asking and achieved prices starting to widen again.

Prices have risen across 25% of postcodes in February – a level not seen since 2007.

The time on the market has also been falling since early 2009. The measure stands at an average of 8.4 weeks – well down from the high of 12 weeks seen in February 2009.

Richard Donnell
Director of Research
Hometrack

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