Speaking to British newspaper The Guardian, Simon Rubinsohn, chief economist at RICS, said that there were two distinct factors why the country’s housing market is cooling off.
Firstly, lack of affordability: with an average house price of £470,000, more than double the UK’s national average, London and South East properties are simply too expensive.
Secondly, inflation: reputedly heading for 3% this month, rising inflation is forcing the Bank of England to contemplate raising interest rates in the foreseeable future. Borrowers are understandably nervous, with many putting off moving home.
RICS said in their report that the price gauge for London property remained “firmly negative”. In the South East, so the report, there were also signs that prices were no longer rising, with potential house buyers and industry experts alike saying that prices are simply far too expensive across the board of available residential real estate.
North-South Divide is emerging
As younger buyers can often work from home thanks to the digital age – at least for part of the week – they are no longer quite so location dependant. Wales, Scotland, Northern Ireland and the North West of England all experienced modest price rises (on average 1.1%) in September 2017, as high prices for residential real estate in the South are putting buyers off.
RICS warned, however, that house prices across the nation were expected to drop over the final quarter and growth over the coming year is predicted to be the weakest since UK voters decided in June 2016 the country should leave EU membership.
The Financial Times meanwhile reported on the UK’s house price situation on 29th September and concluded that London house prices had seen the sharpest fall for the first time since 2009, basing their findings on year-on-year comparisons published by lender Nationwide. House prices, so the Nationwide said, declined by 0.6% overall, as estate agents and buyers alike are worried about a decline in economic growth and the UK government’s failure to get a grip on Brexit negotiations.
Conservative newspaper The Telegraph also spread a little Brexit gloom, reporting on 12th October 2017 that buyer confidence and sales activity were at their lowest level since the 2016 referendum. According to the news organisation, a single room in London now costs more than a whole house in the north east of the country, making it utterly impossible for young professionals – many already saddled with £50k student loan debts – to get on the housing ladder in London and the South East.
RICS’ monthly survey among its members showed that September was the sixth consecutive month were house prices had declined across the UK. Property portal Rightmove, however, reported that cheaper housing stock in the North of England was selling quite well, or at least far better than houses in the South.
Rightmove stated that homes in the South of England were more difficult to sell, with sales prices agreed down 7.9%, compared with 3% in the north of the country.
Miles Shipside, Rightmove’s director and housing market analyst, said that now the average time to find a buyer for a second-step home was 63 days, but many of the portal’s 104,000 new sellers would find it hard to agree a sale before Christmas in 69 days’ time.
“It will be harder for this autumn’s sellers to secure a sale because buyers have more choice. New sellers’ pricing optimism may therefore be unfounded in some parts of the country. With buyers becoming more Scrooge-like with their cash, sellers who have undercut the average 1.1% rise in asking prices may stand a better chance of finding a buyer before Christmas, especially if they are in one of the more active parts of the market,” Shipside explained. It takes on average 86 days now to sell a larger home in London, he added.
At present, the Bank of England has resisted calls to increase interest rates, which currently stand at an all-time low of 0.25%. Brian Murphy, the head of lending for the Mortgage Advice Bureau, believed it remained to be seen, if home buyers would shelf plans to buy in the event interest rates went up in November for the first time in ten years, as many financial experts predict.
“That said … in reality for those seeking a mortgage to purchase their next home, there will still be good fixed rate deals to be had, providing long term security on many households largest element of monthly expenditure,” Murphy said in an interview with The Guardian on 16th October.