Housing market will strengthen into autumn
Transactions are set to get moving
Highlights
- Factors signalling higher sales volumes to come:
- Buyers’ and sellers’ views converge
- House hunting activity picks up markedly
- Confidence steady and comfortably above 12 month average
- House hunters expect flat prices for the coming year
This convergence is a crucial indicator for the health of the housing market. Over the next twelve months sellers expect prices to rise 0.6% and buyers expect a 0.4% rise.
The wider the gap between buyers’ and sellers’ views, the lower transaction numbers become. In September 2004, when buyers and sellers last agreed, transaction volumes were 148,000 (seasonally adjusted). By January 2005, when buyers and sellers disagreed most vehemently, transactions hit their lowest point, just 107,000. From April, as buyers and sellers increasingly agreed that house prices would be flat for the coming twelve months and that a crash was simply not going to happen, transactions steadily recovered from 117,000 (in April) to reach 133,000 in August.
Offers made on properties give a further indicator of the reunion of buyers’ and sellers’ minds. In September, buyers were offering 4.5% below the asking price, while sellers said they would accept offers 4.3% below the asking price. In April, sellers were prepared to accept 4.5%, but buyers were not prepared to offer better than 8% below the asking price. Chart 1 shows how their differing views have changed since January 2004.
Househunting activity on propertyfinder.com picks up sharply
Further evidence of a growing recovery comes from the number of referrals the propertyfinder.com website is passing to estate agents listing properties on the site. In September, househunters visiting propertyfinder.com made 25% more enquiries from the website to estate agents than in April (six months previously). In the three months to September, the number of these enquiries was 12.5% higher than in the three months to June.
Overall confidence remains above average for last 12 months
In September, 49% of respondents believe house prices will rise over the next twelve months compared to 44% who believe they will fall. This continues a flat trend since May and remains above the 12 month average level of those who are optimistic about the outlook for the market.
Jim Buckle, managing director or propertyfinder.com commented: ‘With both buyers and sellers in such agreement in September, we can expect transaction volumes to continue to recover and predict a strengthening market into 2006. We stick by our forecast, made at the beginning August, that volumes will reach 140,000 by November. There is no evidence in our survey to suggest that house prices are set to recommence their upward march, but expectations of flat prices are good for the overall health of the market. With incomes growing and a second interest rate cut (likely by early 2006) meaning reduced mortgage payments, houses are becoming increasingly affordable. Buyers and sellers can go ahead with confidence."
