This 3.6% rise is the largest ever measured at this time of year and has not been exceeded since April 2002. This pushes the national average to £272,003, a new record high. The market momentum and upwards price pressure continue, and this month have been accelerated by the late Easter condensing the spring home-moving season into the reduced timespan between Easter and the summer holidays. It has been further invigorated by the combination of the Easter and May bank holidays causing a lull in the number of properties coming to market at a time of high demand.
Miles Shipside, Rightmove director and housing market analyst comments:
“May is a traditionally bullish price rise month, though this year’s 3.6% jump beats the previous May high of 3.2% set in 2002. A late Easter in the heart of the house-hunting season has not only concertinaed the traditional hottest home-moving period by several weeks, but also stagnated seller numbers, further stirring up prices in areas of buoyant demand.”
Demand for housing remains strong with email enquiries to agents on Rightmove up by nearly 20% so far in 2014 compared to the same period last year. However, the supply of new properties to market is still unable to keep pace with demand, and whilst earlier months this year saw an encouraging increase in the number of new sellers, this month has seen the number of properties coming to market fall by 1% compared to April, as the bank holidays affect seller activity.
Shipside adds:
“In spite of every region having average new seller asking prices higher than a year ago and it being the peak time of year to attract buyers, the lure of bank holiday breaks meant that fewer sellers marketed their properties this month compared to last. The lack of fresh choice will frustrate buyers and lessen their negotiating power in popular locations as pent-up demand continues to be released and more buyers have the confidence and ability to act after years of inactivity.”
The annual rate of increase is now 8.9%. This is the highest year-on-year rise since October 2007 when it was 10.4%. While housing market momentum is recovering in all regions, it is London that distorts the national picture and erroneously drives the ‘national house price bubble’ headlines. The new seller average asking price of a property in the capital is up by 16.3% (+£82,893) year-on-year compared to an average 4.9% (+£11,028) in the rest of England and Wales.
Shipside observes:
“For a bubble to burst you need a sustained drop in demand, yet agents in the capital report a consistently high level of would-be buyers in markets that are not yet out of reach for Londoners. So while you might describe London’s annual jump of over 16% as being as a result of a very frothy market, it is underpinned by long-term demand and a genuine shortage of housing supply. The northern regions are still below their previous peaks, and while all four southern regions are at all-time highs, the average annual rise outside London remains below 5%.”
The disparity between London and the other regions is further highlighted by the growth in new seller asking prices so far in 2014. The average asking price in London is up by nearly £80,000 so far in 2014, an average of £4,405 per week. The weekly average of the rest of the country is £1,521.
Shipside comments:
“London prices traditionally pick up earlier than the rest of the country, and whilst it appears to be slowly dragging other regions along in its wake, the difference is still very marked, particularly when the percentage increases are turned into hard cash comparisons.”
John Penn, Head of Mortgage Proposition at Intelliflo, comments:
“Although recent figures have shown that house price growth is slowing, the numbers are still considerably higher compared to the same period last year. These latest stats also reiterate the fact that the speed of the market is extremely regional with London and the South East driving the rest of the UK. The continued price rises in these two areas are sparking concern that the market runs the risk of overheating.
A key factor pushing up prices is the huge spike in property demand we’ve seen recently, coupled with a significant lack of housing supply. In order for the supply/demand balance to reach a healthier ratio, the estimated number of houses being built each year needs to reach a figure close to 250,000 – roughly double the figures we are currently seeing. Whilst confidence has certainly started to return to the market over the last 12 months, it is key that the issue of housing supply is addressed to ensure that the housing recovery is both stable and sustainable.”
Jeremy Duncombe, Director at Legal & General Mortgage Club, said:
“Any recovery in the housing market needs to be built on solid foundations, and another core issue that needs to be addressed is the imbalance in housing supply and demand. Building more homes across the country would help to keep house prices at sustainable levels, allowing more people to ultimately own their own home. Although house prices are showing an overall increase across the country, there remain significant regional differences. Broadly speaking, prices in the north of the country are not rising in line with those in the south. This imbalance means the Government has to walk a fine line between boosting the market in certain regions whilst stopping prices from racing too far ahead in others. Whilst the Help to Buy scheme has drawn criticism from some quarters, the latest data shows that the majority of applications are coming from the north of England*, suggesting that it is being used to successfully target the areas that still need extra stimulus.”
