Is the UK property market slowing?
Asking prices under pressure
The report by the National Association of Estate Agents suggests that around three quarters of homes sold in January 2015 went for less than the asking price. This is 17 percentage points higher than the same period during 2014 and would seem to indicate a softening of the market.
There are some other factors to take into consideration such as the winter period, which is a difficult time for the property market, when trends can be magnified over a relatively short period. Even though the number of homes sold for less than their asking price has increased compared to 2014, prices have risen significantly and there may be more scope to reduce the actual price to finalise a deal?
Is supply and demand starting to fall off?
The same survey also reported a slight reduction in the number of properties for sale per estate agent having fallen from an average of 47 during the whole of 2014 to 44 last month. Again, there is a danger of taking one month in isolation and rewriting the trend when in reality things may pick up next month.
It does seem inevitable that after such a significant rise in UK property prices over recent years there will be some profit-taking especially against the difficult economic background in Europe and the forthcoming election the UK. These are not exactly positive signs for investors looking to increase their real estate exposure and it may well be that some investors are now sitting on the side lines to see how the situation pans out. It was interesting that there is not only reduced demand but also reduced supply which suggests reluctance on the part of potential sellers to take a lower price?
Are we really starting to see a change in the trend?
As we touched on above, the UK property market has performed admirably in recent times and while many experts believe there is still further room for growth, we could be entering a consolidation period. The UK economy has been touted as one of the strongest in the Western world but the UK government has limited influence over the problems within Europe which are obviously in the thoughts of some real estate investors.
It is also worth noting that even the Chancellor of the Exchequer confirmed that the UK economy would be hit if its European counterpart faltered and the problems within Greece worsened. Whether some investors see this as a long-term investment opportunity, if UK prices soften further, is obviously a matter for debate because the UK property market has been very popular for some time now – with not only domestic but also foreign investors.