Property prices are driven by supply and demand and not so much reacting to wages at this moment in time. As such prices are going up even with stagant wages. This is partly because 50% of people own their home outright - and have no mortgage at all. They are not bound by the rules and 'price' of mortgages.
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Kate Faulkner comments on Demand for Property:
“A tremendous year this year from a sales perspective, helping to boost agents revenues and profits after huge slumps. However, getting the transactions from offer to completion is still tough so professional sales progression services are essential. Lenders are taking time to approve finance thanks to MMR; surveyors are thin on the ground and even legal companies are finding it tough to recruit with so many people leaving the industry during the crash. ”
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What are the indices saying about demand for property?
NAEA “The average number of house hunters registering with NAEA agents fell back from the year high in April (392) down to an average 368 house hunters in July, however, sales were unaffected by this change. The average number of homes sold per member agent stayed at an average of nine in both June and July. (July 2014)”
Hometrack “Demand remains subdued with new buyer numbers down by 0.9% for a second month, largely on seasonal factors. (July 14)”
RICS “Buyer demand has stabilised and sales growth has moderated. That said, while the national picture appears to be broadly resilient, the London indicators are going into reverse. In the capital, enquiries and sales are now falling. (July 14)”
Nationwide “Surveyors report that new buyer enquiries have moderated somewhat in recent months, and the prospect of interest rate increases together with subdued wage growth may temper demand in the quarters ahead. (Aug 14)”
Halifax “"Housing demand is supported by continuing economic recovery, growth in employment, improving consumer confidence and low mortgage rates. Nonetheless, earnings growth that remains below consumer price inflation, and the prospect of an interest rate rise at some point over the coming months, are likely to curb demand.“(Aug 14)
Bank of England “The number of loan approvals for house purchase was 66,569 in July, compared to the average of 67,563 over the previous six months. (July 14)”
Severn Trent “The average daily number of transactions in August was up just 1.6% on the same month last year. It was down around 8% on the average daily number of transactions in July. It’s the lowest year on year increase seen in 2014, showing a slow down in the market. (Aug 14)”
Acadata “Our current estimate of the total number of transactions in England & Wales for the year is 920,000, which represents 91% of the long term average number of transactions per year recorded by Land Registry since 1995. If this level of sales is achieved in 2014, then it will be highest number of transactions in a year since 2007, but will still be lower than each of the years during the period 1996 – 2007. (Aug 14)"
Land Registry“In the months February 2014 to May 2014, sales volumes averaged 68,448 transactions per month. This is an increase from the same period a year earlier, when sales volumes averaged 54,334 per month. (July 14)”
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With demand on the increase this is effecting supply, here are my comments:- “In some areas, a lack of supply has really ‘panicked’ some buyers into snapping up properties for fear of prices rising out of their reach. The good news this month is more sellers are coming onto the market, happy that it’s ‘on the up’ and they are can move with confidence. Rising supply accompanied by higher prices is a perfect mix for the industry.”
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What are the indices saying about supply of property this month?
Home.co.uk “The rate of properties entering the market is now at a 14-month high, up 6% year-on-year. By far the most dramatic change in supply of property for sale is the Greater London region: up 39% year-on-year. The increase in supply should not be overplayed. The total number of properties for sale in England and Wales remains very low indeed: 11% less than in August 2013 and 36% less than in August 2008. (Aug 14)”
NAEA “While supply remains low compared to previous years, this month showed that supply is on the up again and nearing 2013 figures. The average number of properties available per branch increased from 46 in June to 51 in July. This time last year (July 2013) members were reporting 53 properties available per branch. The important first time buyer market has maintained its figures with the proportion of first time buyers purchasing a home in July remaining at 20%, the same as in June, and down from 25% in May. (July 14)”
RICS “New instructions have now increased very modestly for two consecutive months but despite this, price momentum for the time being remains firm. In London, instructions are rising sharply and price momentum, whilst positive, is fading rapidly. The sales-to-stock ratio, which measures market slack, increased to 41 in July, its highest level since 2007 and well above the long run average of 33. (July 14)”
Nationwide “The supply side of the market remains constrained, which will continue to provide underlying support for prices. (Aug 14)”
Acadata “We estimate that the number of housing transactions in England & Wales in August 2014 totalled some 85,000; this is up 6% on August 2013 though it represents a fall of 0.9% from the previous month. Having established that this is the first fall in sales in six months, we should perhaps add that, on average, and based on housing statistics for the last 19 years, sales in August are 0.6% lower than the immediately preceding July. Hence transactions in the summer of 2014 are following a typical seasonal pattern for the time of year. (Aug 14)”
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