At the end of the quarter, Garrington says we have only just started to see a noticeable increase in property coming to the market, albeit that some asking prices are looking, to say the least, "optimistic". Over recent months, Garrington says we have seen the re-emergence of best and final offers for correctly priced quality homes, and even gazumping for the finest homes.
The Nationwide House Price Index shows encouraging data, indicating that house prices have increased by 0.5% throughout the UK in March, marking the third monthly rise in a four month period. In addition to this, there was also a modest rise of 0.6% in the three-month-on-three-month measure of house prices in March, which is widely considered as a better measure of the underlying trend in the market. The shortage of stock at the start of the year has undoubtedly supported house prices, though the annual change for the UK still remains negative at -0.3%, according to Nationwide.
Data from the Land Registry however, shows a decrease in house prices in February of 0.8%, with a deeper annual fall of -1.7%. It remains clear in all reports that there is an increasing divergence in house price recovery between London and other regions. Despite a -0.5% price change in February, London still has the greatest annual increase of 3.2%. Although some regions have shown positive growth in the last three months, including the East and North West, their overall recovery is still low by comparison.
While Garrington would normally expect to see a levelling off of market activity during the Spring market, it has been surprised by the volume of sellers and their advisors contacting in recent weeks with off-market opportunities. During the first quarter, over 60% of all transactions Garrington agreed for clients were conducted off-market, and all acquisitions made over £3million were on properties not available on the open market. This growing pool of discreet vendors appear to be willing to sell for the right price, the right exit timing and the right buyer.
London’s growth is, in part, due to interest from international buyers taking advantage of relocation and investment opportunities driven by political and economic factors. Garrington’s London search team have experienced demand from an increasingly diverse range of international clients, although a hard core of buyers from Asia, Russia and the Middle East remain ever present. London’s international "safe haven" status continues to attract buyers wishing to invest abroad. This trend has been further underpinned by the attractiveness of the still depressed level of Sterling. Consequently, Garrington has seen a surge in asking prices as bullish vendors have re-entered a market buoyed by foreign demand.
Fuelled by successful London sales, Garrington says we are seeing a ripple effect among clients looking to relocate to one of the surrounding counties to take advantage of their additional spending power in a location that has not recovered as swiftly as the London market. Many of Garrington’s clients had already been planning a move to the country, but this current market dynamic and price disparity makes the financial logic even more compelling.
The Budget brought favourable news for investors with a change in tax legislation governing how Stamp Duty is calculated for portfolio purchases. Tax is now calculated at the average value of each unit instead of the total value of a portfolio. Garrington has already seen several clients changing their investment search profiles to take into account these financial savings.
Garrington says we are likely to see mixed messages in the market for some months to come. The recent fall in the Consumer Price Index showing inflation at 4% will undoubtedly push back any decision by the Bank of England to raise interest rates, which has to be good for the property market. However, over-optimistic pricing by sellers could delay a full market recovery.
Garrington expects market conditions to remain brisk in the prime market in Central London and neighbouring Home Counties for the finest homes with the right address.
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