The latest Hometrack survey showed London prices have remained positive over the last six months, in contrast with all other regions across the UK where prices have largely fallen or remained static.
However, there are large parts of London driven by domestic rather than overseas or equity fuelled demand, according to the index, where the growth in price rises remain far more muted.
“For the last six months the housing market has been in a temporary state of equilibrium with sellers and buyers having similar expectations over pricing levels. This has ensured that a steady flow of sales has continued to take place despite the weak economic backdrop,” said Hometrack.
London homeowners have been achieving average asking prices, keeping prices largely static at 93% for the last six months and enabling sales to proceed without major price discounting. However, Hometrack predicts housing demand will slow as household finances come under increasing pressure.
“This is likely to accelerate the downward pressure on prices over the autumn,” it said.
Demand has held up well across the UK this year and increased by 14% in contrast with the decline of 18% in H2 last year. However, home buying demand fell by -1.2% in August.
The steady increase in sales volumes has been a key trend over the last six months, which continued in August with sales up 3.6%. This growth has limited the scale of the downward pressure on prices in recent months although prices still fell 0.1% in August.
Richard Donnell, director of research at Hometrack, the property analytics business, said: “In spite of the challenging macro environment there remains a continued and steady growth in the number of sales being agreed. August registered a 3.6% increase in sales and while this is down on the two previous months, the continued growth in sales has been a positive for the market and has resulted in minimal price changes month on month.”
However, he said when sales volumes start to fall this will exacerbate the downward pressure on prices as agents re-price the market to maintain sales volume.
The Rightmove index, also out today, suggests the rental pricing bubble is continuing to grow as the property shortage pushes up the prices landlords can charge.
One in six tenants say they expect to pay more rent in 12 months’ time.
Miles Shipside, director of Rightmove, said: “Tenants are on the receiving end of this ongoing rental spike and increasing numbers are predicting more pain to come. Their gloomy prediction about their own deteriorating financial fate is backed up by the widening gap between search activity and available rental supply.”
He added: “Their pain is a landlord’s gain with a shortage of rental accommodation and continuing high demand further boosting landlords’ rental returns.”
