House prices remain weak except for London
Commenting on the latest monthly national housing survey, Richard Donnell, director of research at Hometrack, said: “Prices in the capital moved 0.2% higher on the back of a 25% increase in demand (over a 2 month period) and tightening supply.
“Central London saw some of the highest price rises with a 1% increase over the month. In contrast East London registered a -0.2% fall in prices, reflecting the highly polarised nature of the housing market across relatively small geographies.
“Away from central London pricing levels remain under downward pressure. Overall average prices moved 0.1% lower over March, a figure flattered by the relative strength of the London market. The survey recorded price falls across all regions in March with the exception of the South West where prices remained unchanged.
“The modest improvement in market sentiment over the last 2 months – albeit largely confined to southern England – is largely a result of increased sales volumes. The survey shows that the number of housing sales agreed has risen by 38% over the last 2 months. This increase is off a low base. For example provisional data from HMRC shows that non-seasonally adjusted residential transactions were down 30% in January compared to December. That said rising sales volumes show that demand exists and that pricing levels are at a level where transactions can take place – this was not the case over the final half of 2010.”
The survey showed that across three areas East Midlands, Yorkshire and Humberside and Wales the average time on the market is over 3 months and in 2 others (North and North West) it is within touching distance of the 3 month mark (11.7 weeks). Across London the indicator is at half the level seen in the northern regions, while the average time to sell in the South East is just under 2 months.
Linked to extended sales periods, the proportion of the asking price being achieve suggests that underlying pricing levels remain weaker than a year ago. The measure fell over the final half of 2010 from 94% to 91.9% as demand cooled and prices adjusted down to a level where transactions could take place. Over the last 2 months it has bounced back to stand at 92.7%, but remains well down compared to this time last year when it stood at 94%. The same pattern is true on a regional basis.
Donnell said: “Looking ahead, the prospects for the market are dependent upon the recent sales momentum being maintained and levels of demand holding up. Predicting short term fluctuations in demand for housing is notoriously difficult but the key risks revolve around interest rates, unemployment and income growth. It is clear from numerous surveys that consumer demand remains weak and in housing terms this is highlighted by the extended time to sell data in many regions.
“On the supply side, good news stories may be encouraging an increase in the supply of homes for sale – listings were up 5.2% in March following a 7.5% increase in February. If this trend were to continue, then the balance of supply and demand would shift back, putting prices under pressure once again. Such rapid fluctuations in the housing market are indicative of a low transaction environment.
“Looking ahead the key question is whether the market will continue to see increased demand for housing against the wider economic and fiscal backdrop. The market will remain highly polarised with pockets of strong activity alongside weaker areas. Overall we expect headline prices to continue to track lower over the coming months as supply rises and demand remains subdued.”