Over the last seven months house price inflation has steadily reduced from a peak of +0.9% in February.
Excess supply of properties in the market has increased sharply this month with the number of buyers registered with estate agents falling by 5% (following falls of 4% in the previous two months). Hometrack’s unique National Demand Index is now recording an increase in supply relative to demand for the fourth month running. The excess supply points to further house price falls in the coming months.
Hometrack has reduced its 2004 house price inflation forecast to 3% (previously 5%), and predicts 0% house price changes for 2005.
Agreed sales also fell by over 5% this month (-2% in August’s survey) and average sales prices achieved, as a percentage of asking price, fell for the fifth month in succession to 94.5% – the lowest for well over a year.
Average time taken to sell has risen to 5.8 weeks (August’s survey reported 5.3 weeks, July’s survey 4.8 weeks) and the number of viewings has risen to 11.4 per sale (August’s survey reported 11.1 viewings).
House price falls are spread across the whole country. Only five counties out of 57 reported price rises: Teeside (0.2%), South Lincolnshire (0.1%), Nottinghamshire (0.1%), North Yorkshire (0.1%) and North Wales (0.1%).
The largest falls occurred in West London (-1%), Surrey (-1%), East London (-0.9%) and central London & City (-0.8%). While the south is definitely experiencing the highest property price falls, price falls in the north are getting larger and becoming more widespread.
Cities experiencing the largest price falls are Cardiff (-2.1%), Brighton (-2.0%), Milton Keynes (-1.7%) and Guildford (-1.7%). Only five cities reported price rises, all of them moderate: Derby (0.2%), Exeter (0.2%), York (0.2%), Liverpool (0.1%), and Salisbury (0.1%).
John Wriglesworth, Hometrack’s Housing Economist, comments: "Rising interest rates and reducing consumer confidence in the future health of the housing market have taken their toll for the third month running. Falling numbers of buyers, relative to the number of properties for sale, are increasing excess supply in the market, suggesting more house price falls over the coming months. We have reduced our house price forecast for 2004 to 3%, and expect 0% for 2005. The housing boom is now well and truly over.
"While prices are now expected to stagnate over the next 18 months, we still expect some months of price rises. We see the market bumping along a new equilibrium plateau. Interest rates are still at a historical low, unemployment is also very low and household incomes are rising strongly. Meanwhile lenders are falling over backwards to lend ever greater amounts of money relative to individual incomes. This suggests that the present high level of house prices can be maintained. We see no evidence pointing to a housing market crash over the coming year: stagnation or modest deflation depicts the future course for house prices."
