Signs of housing market cool down
The gap between house sellers' asking prices and the amounts that buyers are willing to pay is widening in growing signs of a cool down in the market, property analyst Hometrack has reported.
Sellers in England and Wales typically achieved 95.9% of their asking price in August, falling back for the third month in a row from 96.8% in May.
House prices increased by 0.1% month-on-month for the second month in a row in August and the report said that weakening demand from buyers and an increasing supply of properties for sale means that properties are lingering on the market for longer and sellers are having to accept bigger discounts.
Hometrack said that the findings suggest that the market will see the momentum of house price growth slowing in the coming months, as opposed to prices starting to fall.
It said property prices only tend to start falling when the percentage of the asking price that sellers are achieving reaches below 94%.
Hometrack also found that house price growth in London is continuing to under-perform the rest of the country as buyers become more "price resistant", following the strong increases in values seen in the capital in the first half of the year.
Just 11% of London postcodes recorded month-on-month increases in property values in August, compared with 19% of markets outside London. The impetus for price growth now coming from the commuter belt towns in the South East, Hometrack said.
Property prices were unchanged month-on-month in August in London, East Anglia, the North East and the North West, increased by 0.1% in the South West, the East Midlands, Yorkshire and Humberside and the West Midlands and increased by 0.2% in the South East.
The strongest month-on-month growth was seen in Wales, where prices recorded a 0.5% increase.
Giving examples of how rapidly the London market has cooled in the last six months, Hometrack said that in February, 87% of London postcode districts saw prices increase month-on-month, compared with 11% now.
The typical time it takes to sell a London property has almost doubled since February, from just over two and-a-half weeks to nearly five weeks. This is still around a week less than the average across England and Wales, where the time it takes to sell a home has edged up to just over six weeks.
Estate agents are also seeing signs that competition between home buyers is easing. Earlier this week, the National Association of Estate Agents (NAEA) said that only one in 25 (4%) of homes were sold for above the asking price in July, compared with nearly one in five (19%) in May.
The NAEA said that two-thirds (66%) of homes were sold for less than the asking price in July, marking a sharp contrast to May when less than half (46%) of properties sold for less than the asking price.
Stricter mortgage lending rules came into force in April which force home buyers and people looking to remortgage to provide more evidence of their spending habits to prove that they can truly afford their loan. There have been some reports of mortgages taking longer to process as a result of the new mortgage market review (MMR) rules.
Meanwhile, there has also been mounting speculation over exactly when the Bank of England base rate will rise from its historic low of 0.5%, pushing up borrowing costs.
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."
He continued: "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.
"Both indicators are coming off a positive base which suggest a slowdown in the rate of growth rather than price falls."
Housing Minister Brandon Lewis said: "This Government is committed to delivering long-term economic stability and economic growth...
"The sector is clearly moving in the right direction, but there is still more to do, and improving the housing market will continue to be a vital part of our long-term economic plan."