House prices have stagnated and sales are stalling as Britain’s residential property market shifts in favour of buyers rather sellers...
UK values edged up by just 0.1pc from July to August for the second month in a row, a new report from data specialists, Hometrack, found.
Weakening demand and an increase in the number of sellers putting their homes on the market means that transactions took twice as long to complete in August as they did six months ago, forcing vendors to slash their prices.
Sellers in England and Wales typically achieved 95.9pc of their asking price in August, falling back for the third month in a row from 96.8pc in May.
If that percentage drops to 94pc then prices will start to fall, the property analysts warned.
Stricter lending rules that came in at the end of April, consumer caution ahead of likely interest rate rises, as well over-inflated prices, have been blamed for dampening demand.
House price growth in London is continuing to under-perform the rest of the country as buyers become more “price resistant”, following record values hikes seen in the capital in the first half of the year.
Just 11pc of London postcodes recorded month-on-month increases in property values in August, compared with 19pc of markets outside London.
Hometrack’s data also showed that 87pc of London postcode districts saw prices increase month-on-month in February, compared with 11pc this month.
The impetus for price growth now coming from the commuter belt towns in the south-east as Londoners capitalise on the high prices in the central boroughs and migrate out.
“We’ve reached the usual point where buyers go no thanks,” said Ed Mead, the managing director of estate agent, Douglas & Gordon. “Whenever this happens there’s a three-month hiatus whilst sellers readjust their sights. Asking prices had overshot and a plateau in selling prices to be expected.”
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.
Property prices were unchanged month-on-month in August in London, East Anglia, the North East and the North West, increased by 0.1pc in the South West, the East Midlands, Yorkshire and Humberside and the West Midlands and rose by 0.2pc in the South East.
The strongest month-on-month growth was seen in Wales, where prices recorded a 0.5pc increase.
Hometrack’s new data followed a forecast released earlier this week by property group, Savills, which predicted a slowdown in London house price growth but a pick up in property values in the Midlands and the North later this year.
This was echoed by the London estate agents, Foxtons, on Wednesday.
At its half year results the management also warned of a cool down in the capital.
More than 48,000 households have been helped by the Government’s flagship Help to Buy mortgage support scheme.
A total of 48,393 homes have been bought under the scheme and 82pc of house sales have gone to first-time buyers, the Government said.
The figures include both the Help to Buy equity loan scheme which was launched in England in spring 2013 and the UK-wide Help to Buy mortgage guarantee scheme, which was fired into action last autumn.
Both schemes allow people to move on to or up the property ladder with a deposit of just 5pc but, unlike the mortgage guarantee initiative, the equity loan scheme is aimed at new-build homes only.
The figures continue to show that the scheme is having only a limited direct impact on parts of the country where house price rises are at their most heated, with the highest number of mortgage guarantee scheme completions being in the North West.
The average house price for both parts of the scheme, at £187,800, remains well below the national average house price of £265,000.
The price was £209,390 for the first phase of the scheme for new-build only and £153,148 for the second phase (see below).
The local authority with the most Help to Buy completions has been Leeds with 763, followed by Wiltshire, Birmingham, Central Bedfordshire and County Durham.
George Osborne, the Chancellor, said: “It’s great to see that nearly 40,000 first-time buyers have been helped on to the housing ladder by the Help to Buy scheme.
“This is a key part of our long-term economic plan, which is supporting hardworking people to secure a better future for their families.
“Importantly, Help to Buy is also driving a big increase in house-building in Britain, boosting the construction industry and increasing housing supply.”
UK house prices ‘rise at fastest rate since 2010′
UK house prices have risen by 5.4% in the year to August, according to the Halifax’s latest house price survey.
It is the highest annual rate since June 2010.
On the Halifax’s measure, the average price of a house also went through the £170,000 mark for the first time in five years.
However, the figures are still well below the peak of the market in August 2007, when the average price was almost £200,000.
The Halifax said housing market activity was up thanks to an improving economy, low interest rates, and government-backed schemes such as Help to Buy.
Earlier this month the Nationwide said house prices in August were rising at an annual rate of 3.5%, slightly slower than in July.
The Nationwide compares prices in one month with the same month a year ago.
However, the Halifax compares a three-month period with the three-month period in the previous year.
Martin Ellis, the Halifax’s housing economist, said: “Overall, house prices are expected to rise gradually over the remainder of the year.”
The Halifax believes below-inflation pay rises “are likely to act as a brake on the market”.
The Halifax estimates the average price of a house or flat in the UK is now £170,231. The last time house prices were higher than £170,000 was in September 2008.
The number of mortgage approvals for house purchases – an indicator of completed house sales – rose by 10% between the first and second quarters of 2013.
In July alone there were 60,600 approvals, the first time the number has exceeded 60,000 since 2008.
The rise in prices and market activity, coupled with the Help to Buy scheme, which offers a government-backed loan of up to 20% of the price of the property, have increased fears that the country could be heading for another property bubble.
But last month Mark Carney, governor of the Bank of England, said he was “acutely aware” of the risks, and had a “toolkit” of measures he could employ to combat unrestrained mortgage lending.
Matthew Pointon, property economist at consultancy Capital Economics, said: “A short-term imbalance between housing demand and the number of homes on the market is driving price increases.
“But the rise in wholesale interest rates seen over the past few weeks may soon start to feed through to mortgage rates, dampening demand.”
There are already signs that mortgage rates may have bottomed out, with some lenders increasing rates earlier this week.