03 Oct Supply and demand
The struggling economy and falling consumer confidence are resulting in buyers walking away from the housing market. A report has found that the gap between supply and demand in the housing market is widening; a trend which could result in an acceleration in the level of price falls towards the end of 2011.
The level at which house prices are falling will increase towards the end of the year in the face of a rising imbalance between housing supply and demand, according to Hometrack.
Its latest figures showed a “clear shift” in supply and demand, with the number of homebuyers down for the second consecutive month in September compared to steadily rising demand in H1.
Figures show that prices have now fallen for 15 months in a row.
Buyer numbers fell during September, as was the case in August.
The number of new properties coming to the market has increased by almost a quarter in the nine months to September, while demand has only risen by 11%.
“As the gap between supply and demand widens, we are likely to see an acceleration in the level of price falls,” said Richard Donnell, director of research at Hometrack.
“Events in the Eurozone, together with pressures on the domestic economy and household incomes are clearly taking their toll on consumer confidence.
“We expect demand to continue to slip back over the final few months of the year.”
While prices are not falling at such a fast rate as was seen in the second half of last year – when values fell by an average of 0.5% each month – it has only been the relative strength of the London market that has resulted in smaller declines.
Prices in the capital have risen by an average of 0.2% each month so far this year.
Homes in London are going under offer after an average of six weeks currently, compared with the 11 week national average.
However, regional differences remain stark, with 25% of the UK recording house price falls in September.
The percentage of the asking price being achieved was lowest in northern England, at around 91%, compared to a national average of 92.6% in September.
Donnell said: “The wider the gap between asking and achieved, the less slack there is to absorb weaker demand. In the short-term we see above average price falls registering in the housing markets in the north of the country.”
Estate agents and surveyors are reporting increasing pressure from sellers looking to secure sales before the end of the year, while a rising number of properties are not selling.
He said: “These are typically properties which do not easily fit the profile of demand for the local market and are likely to be seen as overpriced.
“In order to attract buyers and enable sales to take place, these properties will be subject to price adjustments and ultimately kick-start a new phase of re-pricing across the market.”