Impressive August leads to slower SeptemberThe property market slowed in September following a phenomenally strong August, according to the National Association of Estate Agents (NAEA). The number of buyers and sellers on estate agents’ books were down from levels reported the previous month, and was marginally less than the same period last year; despite this sales were encouragingly up from September 2005.
The widely reported plan to increase interest rates further in the coming months could be deterring people from attempting to move up the property ladder. The market seems to have absorbed the August quarter-per cent rise, but a further rise could have a negative impact on the market as buyers and sellers are demonstrating caution.
Sales were down in September by 6.6 per cent from the previous month, with NAEA members reporting an average of 14 sales per agent, down by one on the previous month. The market has recovered from the downturn seen in 2005, the report says, with sales up by 7.7 per cent from the same period last year when agents reported an average of just 13 sales.
Interest rates stay put
The monetary policy committee (MPC) of the Bank of England has held interest rates at 4.75 per cent last week for the second month in a row, following August’s quarter-point rise. Although many expect a further rise before the end of the year – most likely in November – there were those who thought that inflation, running at well above its two per cent target, might force the MPC’s hand this month.
Tom Vosa, chief economist at Clydesdale Bank, said, ‘This may be a relief to home owners but it is likely to prove short-lived. The markets expected there to be no change this month but have already priced-in a rise in November.
‘The MPC will have been helped in its decision to keep things on hold this month by falls in petrol prices throughout September, which should have helped reduce inflationary pressures. It was probably still a close decision, though. A continuing rise in property prices and strong high street sales even after August's surprise increase in rates is an indication that the economy could cope with higher rates.’
Meanwhile, Assetz urges the MPC to refrain from raising interest rates again this year. ‘House price growth is positive but sustainable,’ says managing director Stuart Law, ‘and a further rise this year would instil fear into home buyers, with investors and first-time buyers in particular already feeling the pinch.’
House prices continue to riseProperty prices rose for the third month in a row in September, demonstrating that demand is so far oblivious to August's interest rate rise. A report by Halifax said prices rose one per cent last month, with the cost of an average home at £181,186.
Last week Nationwide reported a similar picture in the housing market. Pundits are now awaiting November’s interest rate decision to see whether the expected increase will have a dampening effect on demand and house prices.
Rental market ignores the season
Letting agents are reporting that the lessening of demand that usually happens towards the end of the year is not being seen this year.
Richard Davies, lettings director at Chesterton Global, says, ‘The incredibly buoyant sales market has had a positive impact on demand from applicants who have capitalised on the sale of their property and decided to rent rather than compromise on their next purchase.
‘Stock levels have been unable to sustain this increased requirement, which has led to a boost in rents. Rental levels across London have increased by 4.7 per cent in the last quarter. Central London has seen the biggest jump in rental increases at six per cent, compared with an increase of 1.9 per cent in west & south-west London.’
The number of agreed tenancies has also risen, he says – by 15 per cent over the past quarter compared with the same period last year. ‘Motivated applicants are viewing fewer properties before committing,’ says Davies.
In light of this, Davies recommends that owners who are considering letting their properties to act quickly. ‘In a market where stock levels are tight and demand is strong a premium rental is guaranteed.’