Increase in supply could scupper housing market

Nia Williams

March 23, 2010

According to Hometrack the year on year rate of growth now stands at 1.3%. However these headline figures of month-on-month growth could change as more properties come onto the market, according to Richard Donnell, Hometrack’s director of research.

“The recovery in market conditions over the last 12 months has been built on a scarcity of housing for sale,” he said. “During the whole of 2009 the stock of housing for sale increased by just 7% – this in contrast to the first 2 months of 2010 when the supply of homes for sale increased by 10.2%. Indeed over March the growth in the number of homes coming to the market exceeded new buyers registering with agents.”

Despite the number of buyers registering with agents falling – from 8.3% in February to 3.3% in March – there was an increase in the volume of sales agreed over the month – up 13% from 0.4% in February.

But, Donnell cautioned, “The increase in supply is not some precursor to the re-emergence of a buyers’ market. Instead it represents a rebuilding of the depleted stock of housing for sale which many agents faced at the start of the year.” Over the last six months of 2009 the supply of homes for sale grew by just 1% while sales volumes grew by 20%.

He continued: “Talk of improved market conditions and prices returning to near peak levels in some markets is encouraging a growing number of households to sell their properties. Many registered buyers are also sellers, and as they gain the confidence to move so they need to put their homes on the market. Overall it seems that we are moving from a sellers’ market back towards something more akin to normal conditions with supply and demand broadly in balance.”

Overall the March survey found that prices were higher across 21% of the country down from 26% in February. At the other end of the spectrum price falls were reported across just 3.6% of the country.

Donnell again: “One feature of the market that shows no sign of changing is the divergence in the relative strength of southern England to the rest of the country. London and southern England continue to be the engines for house price growth with prices during March rising by 0.6% in London and 0.3% in the South East. In contrast prices remained static in both the North East and East Midlands and fell by 0.1% in Yorkshire and Humberside.”

He added, “Supply would need to rise significantly in London and the South East to undermine price rises. And while supply is increasing nationally it is rising at below average levels in both these regions.”

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