Rate hikes cool frantic market

The annual growth in average house prices in the UK has slowed considerably, with only 30 per cent of its agents reporting significant growth (7 per cent plus) compared to 50 per cent of agents six months ago. The average annual price increase was 5.46 per cent in August compared to 6.59 per cent in February. In the current climate with affordability levels stretched, buyers are price sensitive.

More buyers albeit price sensitive

The slowing price growth is not diminishing market activity, however. Although the number of properties coming on to the market in the last three months has remained relatively stable, the proportion of agents witnessing slightly higher (3 per cent to 9 per cent) or significantly higher (10 per cent +) levels of buyers entering the market is at 43 per cent, with only 13 per cent of areas witnessing a drop in the number of buyers on their books.

Despite the increase in buyers, the market is no longer frantic and only the sensibly priced properties are in demand. Buyers are taking action to protect their finances and are prepared to bide their time to ensure that they do not pay over the odds and sellers have had to have lower house price expectations as a result.

First-time buyers not returning

Although the percentage of buyers is up, the level of first time buyers in 60 per cent of haart’s branches has seen a slight decrease (-3 per cent to -9 per cent) or significant decrease (-10 per cent or more) over the last three months. This can be put down to the impact of the base rate rises taking effect. However, with prices stabilising and a possibility that the interest rate has or will shortly peak, the level of first time buyers is predicted to pick up again in the next quarter.

City bonuses set to boost best performing areas further

The Office for National Statistics, has already released figures on city bonuses, with payouts increasing by 30 per cent to a record £14 million this year, a rise twice the size of that in 2006. A large proportion of this money is predicted to be channelled into the property market, boosting prices within the most prestigious areas in London and creating a ripple effect, pushing up prices in the surrounding areas.

London and the South East are continuing to fuel overall national house price growth, with particular hotspot pockets leading the growth. All but one of the 25 areas that have witnessed the highest year on year growth are all within Greater London, East Anglia and the Home Counties.

Paul Smith, chief executive of haart estate agents, commented: “Following a prolonged period of extremely buoyant growth, house price inflation has begun to slow across the UK, as the succession of five interest rises since last August begins to take effect. With buyers now increasingly price sensitive, sellers have lowered their expectations on achievable price.

“However, London has not been affected in the same way, with its property market still showing the strongest levels of price growth and activity in the country. The high level of activity over the bank holiday weekend is an early indication that the autumn market is set to be buoyant, as consumer confidence remains high due to a belief that interest rates may have finally peaked.”