Headline prices fell by -0.1% in July. The balance between supply and demand has improved significantly over the last 6 months largely as a result of steady growth in demand since the beginning of the year.
An improved supply/demand balance together with a rising number of sales agreed – up 20% in the last 2 months – indicate that current pricing levels are broadly sustainable. The proportion of the asking price achieved has remained at around 92.7% for the last 6 months with sellers accepting, on average, a 7% reduction in the asking price to achieved price.
Improving sales volumes have reduced the average time on the market to 9.4 weeks in July down from 9.7 weeks in June.
There are wide variations to the headline trend in prices. Average prices were up by 0.3% in London and East Anglia in July but fell across all other regions. Prices were down by as much as -0.6% in the South West.
Across the whole country prices moved higher across 8% of postcodes – primarily in London. Prices were lower across 27% of postcodes with two fifths of the falling areas located in the South East and South West. Here prices fell from a high base in the face of slowing demand and above average growth in supply.
Richard Donnell Director of Research at Hometrack, said:
“The latest survey from Hometrack shows a housing market in broad equilibrium with an increasing number of sales being agreed between more realistic sellers and a growing pool of buyers.
"Almost 4 years into the downturn, the housing market is showing signs of adapting to a low turnover environment. London continues to provide a strong support to the national trends with prices up by 0.3% over the month.
"Despite a general improvement in the balance of supply and demand over recent months, headline prices remain on a downward trend - falling by 0.1% over July - and are likely to fall further over the coming months.
"Yet with sales volumes holding up there is no impetus for any material change in prices. After a slowdown over spring, the number of sales being agreed has, over the last 2 months, increased by 20%.
"Both sellers and buyers have become more accepting of realistic pricing and this is evidenced by the proportion of the asking price being achieved.
"The figure remains unchanged at 92.7% - in line with the average for the last 6 months. Improved sales rates have resulted in the average time to sell a property falling to 9.4 weeks compared to 9.7 weeks in June.
"Low sales volumes and interest rates are providing a major support to the housing market. Indeed the housing market has adjusted well to low turnover conditions with the volume of forced sales remaining relatively small.
"This means that despite a background of tax rises and spending cuts, the survey of over 5,000 agents shows that there has been a marked improvement in the balance between supply and demand over the last six months
"The final half of 2010 saw a widening gulf between supply and demand which resulted in prices falling. More recently however, demand for housing has picked up sufficiently to narrow the gap to the lowest level for 18 months.
"This supply/demand indicator leads price changes by up to 3 months and suggests that while the rate of price falls is set to slow, house prices are likely to remain under downward pressure in the near term.
"The greatest influence on pricing levels in the short term will be a change in demand. As agents take the lead in setting prices the fact that sales volumes are holding up means that pricing levels are sufficient to maintain sales. With sellers accepting a 7% reduction between asking and achieved prices, there is little scope to push prices higher.
"The improvement in demand over the last 6 months has come as something of a surprise but this in part is down to pent up demand slowly feeding back into the market.
"Four years into the downturn and there will be a growing volume of buyers looking to move. For those in secure work, with equity in their home and the ability to access finance, low interest rates are combining to make a move an attractive proposition.
"While the latest survey shows prices slipping by 0.1% in July, prices moved higher by 0.3% in London and East Anglia. In contrast prices moved lower across all other regions by an average of -0.2% and by as much as -0.6% in the South West.
"Overall prices were down across 27% of the country with a significant number of areas registering price falls located in southern England. The South East and South West regions accounted for 40% of areas posting price falls over July as prices slip back off a high base.
"Locations such as Devon (-0.8%), Wiltshire (-0.5%), Essex (-0.5%) and Buckinghamshire (-0.5%) all posted above average falls over July.”
