Will the Housing Market Stagnate in the Coming Months?
A slowing or stagnating housing market is always felt on the ground by estate agents first of all. Houses go for less than their asking prices and prospective buyers find gaining approval for a mortgage difficult.
At Robert Oulsnam and Company and amongst estate agents across the UK we have been seeing mortgage approvals declining over the last few months as the affordability ceiling appears to have been reached for many potential buyers.
That many houses are currently being sold for significantly under their asking price has been well reported. It is difficult to find a definitive figure for the proportion of properties selling either beneath or above their asking price. Back in May the National Association of Estate Agents suggested that 19 per cent of properties being sold were going for more than their asking price. The estate agents Hometrack recently put the percentage of properties being sold for their asking price at 96.6 per cent during June, which represents a decline on the figure from the precious four months.
The property portal Rightmove, though, has a significantly different set of statistics. In a survey of 6000 people who had bought a property in the last 12 months, it was found that 72 per cent paid under the asking price, with only 21 per cent paying the actual amount, and only 7 per cent paying above. Back in 2013 there had been a 97 per cent rate of payments made of around the asking price.
The inability of buyers to offer asking prices may be due to the Bank of England’s tougher new lending criteria that must be met before mortgages will be granted in the form of the Mortgage Market Review (MMR), and the prospect of interest rate rises. Nevertheless, the phenomenon has been observable for all watchers of the market.
The question that follows is whether there will be a knock-on effect on house prices, as the MMR will continue to make it difficult for buyers to gain mortgage approvals. From the evidence that we have been able to compile at Robert Oulsnam and Company it seems clear there is already some degree of stagnation within the market.
The Hometrack report on June house prices suggests that prices continued to rise – though with a growth rate that is now half of that of three months previous. Recent evidence from Rightmove showed more clearly that house prices have declined for the first time this year. Between June and July asking prices fell by 0.8 per cent, from a UK average of £272,275 to £270,151, with the sharpest declines in the East Midlands and North. The annual growth rate slipped from 7.7 per cent in the 12 months to June, to 6.5 per cent in the year to July.
All of this does represent a degree of stagnation – but we also have to factor in that the summer months would be expected to see a slackening of demand before a pick-up in September. The figures for the coming months will be worth watching out for.