UK house prices have experienced a downward correction in the face of rising supply and falling demand, according to the latest Home.co.uk asking price index.
The August data shows that prices in England and Wales fell by an average of 0.3 per cent this month, including those in Yorkshire. Only the North West, West Midlands and Scotland saw asking prices rise. The largest monthly falls were in London and the South East, which both experienced a -0.6 per cent drop.
The mix-adjusted average price growth for England and Wales is now 1.1 per cent year-on-year: well below the rate of inflation, though Yorkshire has outperformed this with annual prices rising 4.1 per cent. Our neighbours in the North West saw a 4.8 per cent annual increase while the North East suffered a 0.6 per cent fall.
Supply of homes for sale is up by four per cent year-on-year with the biggest increase in the South West, which saw a 15 per cent leap.
Home.co.uk say that rising supply has led to market saturation in the East of England, and this region looks set to join London and the South East in negative year-on-year growth before the end of the year.
The same pattern of supply-induced slowdown combined with a pullback in demand is now affecting the East Midlands and the South West, and this is exerting downward pressure on prices. The West Midlands and the North West look like the next regions to be similarly affected as the negative sentiment that originally emanated from London and later the South East spreads north and west.
Meanwhile, the northern regional property markets continue to perform strongly. These regions, several years later in the cycle than London, are still showing significant market activity. Considerable disparity remains across the regions although price growth inconsistency is beginning to reduce as more regional markets cool off.
For the time being, Greater London prices continue to slide, down 2.5 per cent year-on-year, while Wales has the greatest rate of price growth across the UK, up 5.9 per cent.
Doug Shephard says that oversupply in London continues to take its toll on asking prices, and adds that within a 10-mile radius of the capital, prices have dropped 14 per cent since their 2016 peak.
He says: “Consequently, a growing number of recent buyers will be living under the shadow of negative equity and unable to move home. Later in the cycle, the South East and the East property markets face a similar fate.”
Home. co.uk report that price growth in Greater London, the East and South East have also experienced unsustainable rates of house price growth over the last seven years and downward corrections are likely.
The Midlands and the South West occupy the middle ground. Growth in these regions appears much more sustainable and price corrections in the foreseeable future should be less severe.
The North West, Yorkshire, Wales and Scotland appear to have considerable room for further growth, say Home.co.uk, though the “weakness of these economies and poorer average earning power of the average worker needs to be taken into account”.
The North East stands alone as not having had any sort of meaningful price recovery since the recesssion, says Doug Shephard, who adds: “Its most recent economic inactivity rate tops the regional table. This sheds some light on why it has not seen a recovery in house prices.”