With every boom, there is inevitably a bust. But whether the UK housing market is destined to bottom out is something no one wants to predict. House price surveys released every month show consistently booming figures, yet Hometrack has poured cold water over expectations by sighting signals of a slowdown.
Hometrack shows house prices rose by 0.6 per cent in July, taking year-on-year growth to 3.2 per cent. Yet news of another rise is countered by a downturn in the percentage of the country seeing a raise in prices. In June agents reported monthly price rises across 42 per cent of the country, while in July this fell back to to 31 per cent, and just 19 per cent if London and the South East are removed.
A further factor Hometrack cites is a 0.9 per cent decline in the volume of new buyers registering with agents over July, the first decline in buyer numbers this year. While this is a normal seasonal trend, it has arrived a month later than in previous years, though this could be explained in part by the World Cup.
Cautious
But industry figures are cautious over the news of a slowdown. James Cotton, mortgage specialist at London & Country, says: “We don’t necessarily know the market is slowing down, it really depends on which survey you look at. You can’t really get a decent conclusion when looking at one month’s figures. It takes a long time to sell a house and it varies month-to-month. Surveys often disagree. If you have good figures for the first six months and then one bad month, you can’t really say that the market is slowing or crashing. We will start to get a better idea when we get several months of consistent data.”
This is backed by Thomas Reeh, chief executive at blackandwhite.co.uk, who notes: “Hometrack is traditionally the most conservative of the surveys, so the best way to look at all the surveys is to lump them together as they all use slightly different data. The continued lack of supply and demand is continuing to push house prices up and it is new, innovative products that will allow first-time buyers (FTBs) to get on the property ladder.”
The removal of London and the South East from figures is a move that Rachel Blackmore, head of external affairs for the Building Societies Association (BSA), believes is unhelpful. She says: “Approvals for mortgages were at record levels last month. If I were to exclude part of the market, I don’t know what my lending figures would be. It’s not comparing like with like if you exclude the hotspots as the figures are not for whole of market.”
Gentle slowdown
She continues: “The BSA has predicted for quite some time there would be a gentle slowdown in the market and a natural correction. We have never seen economic circumstances like these, with low interest rates and high employment rates that have been sustained and not followed by a crash, so it’s very difficult to predict where we will be at the end of the year. It’s difficult to read into market trends on one month’s figures, so it could be a blip. There is optimism in the market, but we would caution buyers not to overstretch themselves.”
But Rod Murdison, proprietor of Murdison & Browning, sees a slowdown in the rate of increase of house prices as potentially a good thing. “If house prices were to decrease for a period of time, it wouldn’t be that bad a thing as you would have a mass of FTBs coming into the market, as no one wants to buy at the peak of the market.”
Murdison suggests the potential for a tax incentive as a way to rectify the gap in the market left by FTBs while maintaining house prices. He says: “If FTBs were incentivised in some way by the government it would be good, as it would encourage them into the market.”
Headlines of a slowdown should rightly be viewed with caution, as the last thing anyone wants is consumers to panic sell and create a crash. But only time will tell whether the predictions are accurate and the slowdown has definitely arrived.
