House Sellers are being forced into lowering their asking prices, as an increasing number of buyers shift their position on the amount they are willing to pay to purchase new homes, according to new data which indicates that heat could be leaving the housing market.
Although House prices have risen on a month by month basis, reduced demand combined with an influx of properties coming onto the market meant many houses were beginning to vegetate on the market. As such sellers who were seeking to cash in on their property had to lower their expectations over cost.
This is underlined by sellers within Britain taking 95.9% of their initial property valuation in August, which represented a third successive monthly drop, according to Hometrack. The property expert suggested that this data indicates an impending slowdown in house price growth rather than outright falling housing valuations. According to Hometrack, this is because prices only start to decrease when sellers start raking in less than 94% of their asking price.
Reduced demand has been attributed to restrictive measures imposed on lenders in the BoEís Mortgage Market Review in April, consumers reining in their spending to combat the effect an interest rate hike will have on housing costs and the rising cost of essentials in real terms.
The London Effect
Record house prices reached in London over the first six months of the year has served to sufficiently deter would-be buyers away from the excessively costly capital. As such, house price growth has stunted significantly, being outstripped by the rest of Britain. Hometrack revealed that 11% of areas within London registered exponential monthly price increases, which pales in comparison to the 19% of areas outside the capital.
Highlighting how drastic the fall in house price growth has been in the past six months, Hometrack identified an 87% of London postcodes which saw exponential monthly price increases in February, juxtaposing it with this monthís 11%.
Additionally, Hometrack underlined the increasing length of time taken by sellers to complete property transactions within the capital, stating that it has doubled since February to almost 5 weeks. Although this time remains slower than the average for the rest of Britain, it still stresses how much heat has been taken out of the London housing market.
ìWeíve reached the usual point where buyers go no thanks,î said Ed Mead, the managing director of estate agent, Douglas & Gordon.
ìWhenever this happens thereís a three-month hiatus whilst sellers readjust their sights. Asking prices had overshot and a plateau in selling prices to be expected.î
People could be feeling the restrictive effects of the stringent lending rules enforced in the MMR which require borrowersí to provide proof of their long-term financial viability. Moreover, the general addition of red tape to both mortgaging and re-mortgaging processes has indirectly contributed to the slowdown in the number of mortgages distributed on a daily basis.
Richard Donnell, director of research at Hometrack, said: "The latest survey continues to point to clear evidence of slowdown, particularly in the London market.
"This is not a huge surprise for August but the signs of a slowdown in market activity were starting to emerge back in May, with evidence of growing resistance to rapid price rises in the London market.
"Important lead indicators in this survey are turning and pointing to a loss of momentum in house price growth, in particular a widening gap between asking and achieved prices in the face of weaker demand and an increase in the time on the market.
A slowdown in house price growth could also be indicative of consumer fears of a rising base rate. When the Bank finally does increase the record low base rate, borrowers will be fearful of the effect it will have on their already high mortgage repayments. With recent data, released by Shelter, showing the weighty proportion of their in-goings which low-income households are allocating to housing costs, it is no surprise that increased caution is being exhibited.