Summary:
- London house prices increased by 1.5 % but still remains 3.8% down from a peak in July 2004
- Asking prices are becoming more realistic with buyers typically achieving only 2.1% reduction of asking price in contrast to 4.1 % last month
- First time buyer levels plummet at low of 18%
- Spicerhaart supports Bank of England’s decision to freeze interest rates
London house prices picked up during the run up to the election, with a 1.5% increase during April. The average house in London is now worth £219,952 from £213,086 in March.
Russell Jervis, managing director of haart estate agents says: “Although we have seen a dip in the housing market as house prices have realigned over the past year, the housing market is now in a stronger position. It has recently turned and is now much more buoyant. April has been our most successful month of the year, with the number of sale transactions increasing by nearly 8% from last month.”
The pick up in the market is predominantly due to the fact that property prices have realigned to more sensible levels and vendors have also now started to come to terms with the need to realistically value their property. With the lowest percentage reduction in asking price over the past year at 2.1% in April, it indicates that properties are now at market clearing level and more in line with prices that buyers are prepared to pay.
Russell Jervis comments: “ We have recently seen buyers and sellers at loggerheads whilst trying to negotiate an agreed sale price. Vendors naturally want the best value for their property and often hold out for the highest estimate. This really is to their detriment as properties that are over priced will not sell and will become stale on the market, as potential buyers become very suspect of properties that have been on the market for a long time.
“However many vendors are now starting to listen to our advice and are putting their properties on the market at the right price. As a result, buyers are offering to purchase properties nearer the asking price and they are being snapped up.”
The percentage of first time buyers has dropped to a low of 18% - the lowest since October 2004. First time buyers that have already stretched themselves to get a foot on the property ladder have been hit the hardest from the increasing interest rate rises last year.
Russell Jervis supports the Bank of England’s decision to freeze interest rates and warns that further increases will draw the market to a halt: “First time buyers form the foundation of a healthy housing market. If they are unable to buy because of the high property prices and the fear of rising interest rates, the market will quickly draw to a halt.
“Our data has shown a distinct negative reaction to the Bank of England’s succession of interest rate rises last year. Despite the improved confidence that we have recently seen, it would have been totally undesirable for the Bank of England to inflict further interest rate increases at this stage.
Commenting on the prospects of the London market over the coming year, Russell Jervis says: “It is very common for market confidence to dip pre election but as we have seen this is often a very temporary dip that swiftly picks up once the dust settles post election, as the political and economic environment becomes more certain. We therefore predict a much more buoyant market in the next quarter.”
“In fact on the back of our latest research on the effects of elections on the housing market, we predict that house hunters’ confidence will quickly bounce back with a predicted 10% increase in the number of homes sold over the next quarter”
On average the reduced discounts on the asking prices is 2.1% In this current market the least expensive areas of London are faring well with monthly percentage change in asking prices reaching 10.8 % in the East and 3.6% in the South East.
