First drop in prices this year signals buyers’ market in second half of 2019
- The price of property coming to market falls by 0.2% (-£656), the first monthly fall so far in 2019
- Key metrics indicate a buyers’ market in the second half of 2019:
- Less property is coming to market, but it is taking longer to secure a buyer, so estate agents’ average stock per branch is at its highest since July 2015
- Time to secure a buyer is at the longest at this time of year for six years
- Prices of newly-listed property down by 1.1% this month in the upper sector of four-bedroom-plus homes, while lower and middle sectors holding their prices better this month and year-on-year
- Market fundamentals remain sound apart from confidence, and buoyant mortgage approvals indicate more resilient activity in the lower and middle sectors. It is buyers at the upper end, who are less likely to need a mortgage, who appear most hesitant to engage
The price of property coming to market falls by 0.2% (-£656) this month. This is the first monthly fall so far in 2019. While prices are traditionally weaker in the second half of the year, this year also sees the highest total stock per estate agency branch since 2015. With continuing political uncertainty we expect buyers in market sectors where there is an over-supply to have a stronger hand negotiating lower prices in the coming months. With sound underlying market fundamentals, apart from the lack of confidence caused by the uncertain political outlook, there should be a better bargaining opportunity for those who have hesitated and missed the busier spring market if they can now find the confidence to engage without waiting for more certainty.
Miles Shipside, Rightmove director and housing market analyst comments: “The housing market fundamentals remain largely sound in many parts of the country, but the current political climate means that the crucial ingredient of confidence has been impaired, and that is causing some potential buyers and sellers to hesitate. With record employment, low interest rates and good mortgage availability, buyers have a lot in their favour apart from the lack of political certainty. Those who have postponed their purchase should note that estate agency branches have more sellers on their books than at any time for the last four years, so there should be more choice of properties to buy. It could be a good opportunity to negotiate a relative bargain in the second half of the year, if they can set aside the continuing Brexit distractions.”
Fewer properties are coming to market, down by 7.8% this month compared with the same period a year ago, and furthermore fewer sales are being agreed (down by 4.6% in the year-to-date compared to the same period last year). Estate agents’ total average stock per branch is higher than at any time in the last four years. Average stock is now running at 53.3 properties, the highest number since the 54.0 that was recorded in July 2015. In addition, the average time to secure a buyer is at 62 days, the highest at this time of year since 2013. This longer time to secure a buyer, coupled with higher property stocks, suggest that it will be more of a buyers’ market in the second half of 2019.
Shipside notes: “Growing numbers of properties on agents’ books even though fewer properties are coming up for sale are evidence of a more challenging market, with more sellers competing to get their transaction over the line. With activity and prices often weaker in the second half of the year, it will be those sellers who are bold enough to price aggressively who will attract buyers with the confidence to act rather than hesitate. It would appear to be sellers in the upper end of the market who need to be boldest on pricing, as data shows that the middle and lower sectors are holding up better.”
Activity is more robust in the mainstream lower and middle markets, made up predominantly of buyers requiring a mortgage rather than cash buyers. The latest figures from UK Finance show that the number of mortgage approvals from the main high-street lenders in May was up by 9.1% year-on-year. New seller asking prices are also holding up better in these sectors, with typical first-time buyer property the same price as last month at 0.0%, while the typical second-stepper home is up slightly at +0.2%. The upper end, comprising four bedroom and larger properties where buyers are less likely to need a mortgage, has dropped by 1.1% month-on-month.
Shipside observes: “While buoyant mortgage approvals indicate more resilient activity in the lower and middle sectors, it is the cash-rich in the upper end who appear most hesitant to engage. They are often discretionary buyers, whose needs for more space or the motivation for a change of location can be postponed. As a result, sellers in the upper end have had to drop their prices more both month-on-month and year-on-year, suggesting that the best bargain opportunities in the second half of 2019 for canny buyers could be in this price sector. Buyers in all market sectors in the less buoyant south and east of the country are also in the driving seat, but greater market momentum further north means that sellers will still be able to steer clear of buyers who are looking for too cheap a ride on the back of Brexit uncertainty.”
Lucian Cook, head of residential research at Savills, comments: “Since the Brexit vote, the market has become driven by sentiment far more than the traditional economic drivers of affordability. That said, 2016 also coincided with the markets of London and the higher value parts of the South East hitting up against the limits of more regulation. As a consequence the slowdown has, to date, been most evident in that part of the country. There are early indications that this ripple of caution, that is constraining price growth, is spreading more widely into some of the markets further north. Protracted political hiatus has added to the sense of caution over the prospects for household finances, even though mortgage debt remains cheap. These market conditions have sorted the needs-based movers from the discretionary ones who are often in larger properties. They also mean that selling in the current market requires a healthy dose of pragmatism, which is reflected in a decline in asking prices. Where that has been taken on board, stock has continued to trade. That presents opportunities for those looking to trade up the ladder, though they need to be as realistic about the value of their own property as about the one that they want to purchase.”
Shaun Adams, managing director of Sussex-based Cooper Adams and a Fine and Country branch, said: “I think that what we’re seeing at a local level reflects what the Rightmove statistics are showing. For us, the market was quite dire at the start of the year, but things have livened up from June onwards. Maybe lots of people are sick of waiting for Brexit to happen and are just getting on with things, but we anticipate there might be another lull in the run up to the October 31st deadline, although thankfully that hasn’t happened yet. The market right now is still quite buoyant but it is changing. Beforehand, if a seller was optimistic, they would most likely still get their valuation, whereas now they could alienate potential buyers and have their property go stale.”
Scarcity of new sellers shows signs of helping London market to stabilise
- The price of property coming to market falls by a modest 0.2% (-£939) in London this month, compared to the average 0.6% July fall over the last five years
- Number of new sellers down 18% on the same period a year ago preventing over-supply and underpinning prices
- Signs of market bottoming out with time to sell the same as a year ago at 67 days
The price of property coming to market in Greater London falls by a modest 0.2% (-£939) this month. This compares favourably to the average 0.6% monthly fall for July over the previous five years. A significant drop in the number of properties coming to market is helping to balance supply with the reduced demand, and underpin prices.
Miles Shipside, Rightmove director and housing market analyst comments: “New seller asking prices have fallen by just 0.2% this month, but a fall at this time of year is the norm and it is comparatively healthy when compared with the five-year average. There is no glut of forced sellers, which is preventing the over-supply that could have led to a downward price spiral in this period of reduced buyer activity.”
The number of new sellers this month is down 18% on the same period a year ago. TfL Zones 1 to 3 see the biggest scarcity of new-to-the-market listings, with drops in excess of that average in each of these zones. With the limited fresh choice for buyers and the substantial price drops that we have seen since the peaks of a few years ago, there are tentative signs of the market bottoming out. The average time taken to sell a property is the same as it was a year ago at 67 days, a further sign of stability returning to the market with no further deterioration in key metrics.
Shipside adds: “The lack of sellers coming to market is more pronounced the closer to the centre of London you get. TfL Zones 1 to 3 all have over 20% fewer new sellers this month compared to the same period 12 months ago, (with prime central Zone 1, 29% down on July 2018) having the most stay-away sellers. Owners in this area are typically able to pick and choose when to come to market, as they tend not to have a pressing need to liquidate their assets. They have perhaps decided to spend an extended summer break at one of their other properties around the world and wait for this stabilisation of the London market to turn into a recovery.”
Borough data is based on a three month rolling average and can be used as an indicator of overall price trends in each borough over time. It is not directly comparable with the overall London monthly figures.