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Housing market: a disastrous May

publication date: Jun 23, 2010
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Hometrack’s latest monthly national housing survey reports that the property market in May was even flatter market than that of the last three months.

Richard Donnell Director of Research at Hometrack (the property analytics business) said, “The May survey of 1,500 agents and surveyors across the country shows how uncertainty generated by the election had a clear impact on housing market activity with fewer buyers coming to the market, a marked slowdown in sales agreed and a drop off in the number of new homes for sale.”

After two very difficult years agents had been hoping for a Spring uplift, but it hasn’t yet happened – and that is very bad news for many agencies.

Hometrack’s report continues, “A continued trend over recent months has been the relatively low volumes of new demand coming to the market. In the last three months there has been just a 4.6 per cent increase in new buyer registrations - well down on the 21 per cent increase seen this time last year when we saw something of a mini recovery in the housing market”.

But despite weaker demand and rising supply house prices are still rising, almost certainly due to the continued scarcity of property for sale. The growth in sales agreed outstripped the number of homes coming to the market in the last three months, highlighting agents’ ability to quickly shift all new stock as it comes to the market. This combination of scarcity and continued growth in sales volumes is providing them with the confidence to mark prices ever higher.

Hometrack reports that while there has been much focus on the plight of first time buyers and access to mortgage finance, the reality is that today’s housing market is transacting on sales supported by buyers with either no mortgage or a relatively small mortgage.

“We estimate that together these two groups account for almost 75 per cent of all owner occupiers or 14 million households. Against a backdrop of continued low transaction volumes this group has the capacity to keep the housing market ticking over for the rest of the year. First time buyers and mortgage constrained households face continued problems accessing or climbing the property ladder”, says Richard Donnell.

“Headline price increases are being sustained by prices rising in less than a fifth of postcodes across the country - with most of these areas located in the ‘equity driven’ markets of southern England. Across the remaining 75 per cent of the market, activity levels remain low with prices neither rising nor falling as homeowners sit tight.

“Looking ahead we expect housing market activity to remain subdued over the summer and into the autumn as households shift their focus from the election to the forthcoming emergency Budget and the implications for take-home pay and the economy overall. While the contents of the Budget, together with recent turmoil in the equity markets, may have some short term impact on market sentiment, the recent balance between supply and demand is unlikely to change radically in the near term.

Low turnover looks set to remain the dominant feature of the market - a trend that will sustain the scarcity of housing for sale and continue to act as a support to prices, particularly in southern England”.