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Potential for house price corrections as demand falls and supply rises – Propertymark

  • 03/04/2024
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Potential for house price corrections as demand falls and supply rises – Propertymark
Buyer demand for residential homes fell back in February following a post-Christmas bounce, despite a rise in stock levels, and could result in a short-term price reduction, analysis from a property sector organisation found.

The Propertymark housing insight for February showed there was an 18% uptick in the number of new homes coming to market, with around 10 properties being placed for sale per member branch. 

The organisation said this was in line with activity seen in both 2022 and 2023. 

Stock levels at each estate agency also rose by around 9% compared to January, and were also higher than the same period last year. 

Although there was a rise in properties coming to market, appraisal levels stayed stable between January and February, and were also similar to 2023. 

At the same time, Propertymark recorded a 3% fall in the number of prospective buyers registering per estate agency branch. It said that, while numbers had “increased considerably” in January, “momentum appears to have stalled”. The number of hopeful buyers was also down on the previous year. 

House viewing numbers also declined, with around three per property, but this was broadly in line with last year’s activity. 


A buyer’s market 

Propertymark said it was currently a “buyer’s market”, as the proportion of homes selling for less than the asking price was starting to rise again. 

There were also more agreed sales in February, with a 19% increase when compared to the previous month. Again, Propertymark said this was in line with activity seen the year before. 


Tenant demand falls 

The number of new prospective rental tenants registering with each estate agency member brand fell from 97 in January to 89 in February, representing a 16% decline. 

Stock levels also fell by 26% from around 11 in January to around eight per branch in February. 

Despite this, there was still an imbalance between the number of rental properties available and the number of tenants wanting to rent. 

Propertymark said that, on average, there were around 10 new applicants for each available property, which was higher than the average of eight in January and seven in December. 

The number of tenants per property was similar to the same month last year. 

There was also a drop in the number of new tenancies agreed in February, which Propertymark predicted was due to people being unable or unwilling to move. 

The split of Propertymark members witnessing either a rise, fall or no change in rental prices was the same as the previous month, with 38% noting a rise, compared to 39% the month before. 

There were fewer rental arrears in February, with members reporting just 3% of properties falling behind with payments. 

The void period between tenancies remained relatively unchanged, going from an average of two-and-a-half weeks in January to 2.2 weeks in February. 


Further house price corrections? 

Nathan Emerson (pictured), CEO of Propertymark, said: “Interest rates remain challenging, GDP has stagnated and broader economic indicators, such as mortgage arrears, are trending upwards. 

“However, there is light at the end of the tunnel, with inflation continuing to fall. In the residential sales sector, demand has temporarily slowed following the January post-Christmas bounce.”

He added: “On the supply side, our members are busy with new instructions, which is increasing stock levels. This imbalance may lead to further price corrections, but only in the short term. In the residential lettings sector, tenant demand has marginally decreased. 

“However, stock levels have also decreased and, overall, demand continues to outpace supply; in fact, there were around 10 new applicants registered in February for each available property.”

“Rents continue to fluctuate by location and property type, although there are some signs of stabilisation. As we progress into March and beyond, the re-establishment of seasonal trends should result in positive progress in both the sales and lettings sectors,” Emerson said. 

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