Mixed messages: transactions slump again but London prices improve

The latest transaction figures from HM Revenue and Customs make depressing reading - a three per cent drop between May and June, falling to 96,370.

House sales completions were also 5.7 per cent lower in June this year compared with the same month in 2017.

"We certainly would have expected higher figures bearing in mind the spring buying season is generally the best for the property market" explains Jeremy Leaf, north London estate agent and a former RICS residential faculty chairman.

"However, we are not really surprised when, on the ground, we’re seeing fewer buyers nervously trying to negotiate best possible terms and transaction times lengthening as a result. We don’t expect to see any great change but have noticed more listings and viewings in the past month or so” he adds. 

Mike Scott, chief property analyst at online agency Yopa, says the slowdown appears to be driven by both lower supply and lower demand “so it is unlikely to have much effect on house prices, which will continue to increase as long as we keep the current situation of low unemployment, low interest rates and good availability of mortgages.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, says the transaction data adds weight to the belief that an August interest rate rise by the Bank of England is “now looking very unlikely.”

However, while that is happening, prices in London appear to have picked up over the past three months according to Hometrack, which has produced one of the few pieces of good news for the capital’s agents in recent months.

In the three months to the end of June, house prices across London as a whole rose by 1.8 per cent, having fallen by 1.0 per cent over the previous six months.

Hometrack’s insight director, Richard Donnell, says that after two years of weak demand and falling sales, there are signs that London’s housing market is beginning to steady, although the annual rate of growth remains low at 0.7 per cent. 

The recent trend is supported by the fact that 61 per cent of postcodes in London are currently registering month-on-month price rises.

Donnell says this modest improvement in market conditions reflects greater realism on the part of sellers in the wake of a two-year re-pricing process. 

The discount sellers must give buyers to achieve a sale has started to narrow across London, reversing a two year upward trend; it is now an average of 4.8 per cent. 

However, London remains in a group of six cities - of the 20 reviewed by Hometrack - where house prices are failing to keep pace with the Consumer Price Index and where house prices are falling in real terms - Southampton (up 2.1 per cent), Oxford (up 1.9 per cent), Belfast (up 1.4 per cent), London (up 0.7 per cent), Cambridge (down 0.2 per cent) and Aberdeen (down a full 2.8 per cent).

House price growth is strongest in cities in the Midlands and North West of England. Manchester is registering the highest annual growth rate (7.4 per cent), followed by Liverpool (7.2 per cent), Birmingham (6.8 per cent) and Leicester (6.5 per cent).

The level of discounting from the asking price to achieve a sale is lowest in Manchester - just 2.2 per cent - where market conditions have remained strong for the last two years. 

“While prices in London have picked up over the last quarter, we expect the annual rate of growth to remain weak for the foreseeable future. The positive news is that greater realism on the past of sellers will support transactions, which have fallen by 20 per cent since 2014” admits Donnell.

“The UK market is operating at two-speeds at the moment, with growth in regional cities in the Midlands and North West far outstripping those in the South. However, affordability pressures in the South East in particular are having a slowing effect on house prices as borrowers are priced out of the market.”