The UK property market is showing signs of growth that is not exclusively driven by the price of homes in Greater London.
That is the key finding of the latest Home.co.uk Asking Price Index.
Average asking prices across the UK increased 0.7% in the last month, largely driven by the South East, South West and Scotland, each reporting rises of 1.0% or more.
Prices in London also played their part, rising again last month by 0.8%, and given the restricted supply and high demand (as demonstrated by very short marketing times), the capital’s property market is showing the early warning signs of overheating.
A combination of a reduction in the time on market for sales property and the subdued flow of new stock (down 4.0% on last year) will help support prices going forward and provide a further boost to vendors’ confidence. The typical (median) time on market now stands at just 102 days (around 3.5 months) although there are still considerable regional differences.
A boost in prices and considerable falls in the average time on market is finally being felt beyond the capital. London still witnessed another strong monthly rise in average prices but, nonetheless, it was outperformed by the South East (+1.2%), South West (+1.0%) and Scotland (+1.0%).
The South East has shown four consecutive months of price growth and prices are now 3.9% up on this time last year. Lack of property supply is a common factor across these high performing areas, and there are also indications that the volume of transactions is gradually improving.
Another monthly price rise of 0.8% brings the average asking price of property in London to a staggering £376,021. A rise of 7.5% in just 12 months prompts serious questions about how long the market can sustain such a high rate of growth. The current 14% annual reduction in new instructions and the shortest time on market in the UK will only serve to drive prices higher. Moody’s Investor Service recently warned of market conditions triggering a new house price bubble and it is evident that London could be at the forefront of any such overheating.
If the usual seasonal patterns were being displayed, more vendors would be encouraged to enter the market during spring. However, the total volume of on-market property has not shown any considerable growth over recent months and new instructions remain down 4.0% year-on-year and 22% down on April 2011. London and the East Midlands have witnessed the largest annual falls in new property stock, with drops of 14% and 8.0% respectively. The typical time on market for unsold property across the UK has fallen 28 days to 102 days since last month. The renewed vigour found in the London and South East markets is, to some extent, moving to other regions of England, Scotland and Wales. Considerable regional differences do still exist, but, year-on-year, the typical time on market has dropped in all regions except the North East. Yorkshire and Humber, for example, shows a dramatic improvement, with a typical marketing time currently 30 days less than in May last year. Such significant drops indicate that formerly lacklustre regional markets are finally showing signs of genuine recovery. Doug Shephard, director at Home.co.uk said: “Nearly six years on from the onset of the financial crisis, it is encouraging to finally see stronger UK performance indicators that are not almost exclusively driven by London. Other areas of the UK are now really beginning to show signs of recovery and that, in turn, will help boost the confidence of local vendors and buyers alike. Whilst price recovery is vital, a key factor in the health of regional markets is the time taken to market a property for sale. Further improvements in mortgage availability will undoubtedly help markets outside of London and the South East along the road to recovery.
“The dazzling London market continues to perform very strongly but is, perhaps, a little too hot for comfort. With high demand sending prices spiralling in many parts and a drought of new instructions, the early warning signs of overheating are becoming all too apparent. This danger has been echoed by Moody’s recent warning of a renewed price bubble. A gradual improvement in confidence coupled with support from the government could well over-stimulate certain areas of the country, with the London market being the clear forerunner in any such price bubble.”
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