Lower marketing times and limited stock afford steady price growth
The UK property market continues to improve despite mortgage rate uncertainty, according to Home.co.uk’s Asking Price Index for June.
Prices are steadily recovering ground lost during last year’s sudden correction. Marketing times are in the normal range and in no way indicate an overall slowdown. The northern regions, Scotland and Wales all show considerable improvements on their 2018 figures, while London and the southern English regions show slight increases compared to their pre-COVID figures.
Rapidly rising stock levels, which previously gave cause for concern, may well have maxed out at below the 10-year average, and this would be consistent with the seasonal ebb and flow of agents’ portfolios which typically peak during the summer months. Supply of new instructions remains subdued and is currently running at 15% less than in May 2018. Going forward, this relative scarcity will serve to support prices further.
All these key indicators show how truly resilient the market is: both quick to adapt to even severe financial shocks and then quick to recover. Of course, the unprecedented demand in the rental market is playing a key role in restricting supply in the sales market. Vastly improved yields and very short void periods (typically less than three weeks) make letting an attractive option for hesitant potential vendors.
Rents continue to rise overall. The mix-adjusted average annualised rise for the UK stands at 11.4%. Supply remains tight in the face of overwhelming demand. This is undoubtedly the unintended consequence of many years of landlord disincentivisation through increased taxation and regulation. The levelling up agenda has, ironically, made it even more difficult for renters to get a foot on the property ladder while rising rents gobble up any spare cash they might have had.
Meanwhile, the HMRC is clearly the main beneficiary, along with local councils and their costly yet mandatory registration schemes.
Contrary to all the doom and gloom in the media, mortgage rates remain around 4% which remains extraordinarily reasonable relative to the rate of inflation despite the recent decline. Of course, the welcome drop in both CPI and RPI reduces the risks of further hikes in the Bank of England base rate and this will serve to encourage buyer demand. Furthermore, the drop in April’s inflation reading may serve to mark a trend reversal in real price growth.
The annualised mix-adjusted average asking price growth across England and Wales is now -1.3; in June 2022, the annualised rate of increase of home prices was 6.5%.