The gap between the asking price for a property and the price for which it eventually sells is closing, demonstrating that increasing demand and purchasing power are pushing UK house prices upwards.
Research from London estate agent Hamptons International shows that, in the last three months, average selling prices across England and Wales were just 2.9% short of the original asking prices. This is the smallest the gap has been at any time since 2007, at the height of the housing boom.
According to Hamptons International, the only areas in which the gap hadn’t narrowed were the North East of England and Wales. The gap is narrowest in London, where house prices have risen at what many are calling ‘unsustainable’ levels. The property website Rightmove recently said that asking prices increased by 10% between September and October.
The average asking price in the capital is currently over £544,000, and the average selling price just 2.0% short of this.
“Increased confidence in the housing market as the economy begins to recover, coupled with stimulus from the Government’s Help to Buy scheme, is encouraging previously nervous or frustrated would-be buyers into the market at last. “This new demand, in combination with relatively low supplies of property for sale means that there is less room for negotiation on asking prices. “…Paradoxically this is good news for both buyers and sellers. Further price rises, as predicted by this measure, should encourage more people to put their property up for sale and an improvement in supply will foster a more liquid and therefore a more stable market.”
Fionnuala Earley, Research Director at Hamptons International
Whilst Ms. Earley is correct insofar as a growing number of sellers will improve market liquidity and stability, the housing market does not operate on a ‘one in, one out’ basis. Many people are entering the market for the first time, whilst individual landlords are continuing to expand their portfolios. As such, homebuilding needs to increase to meet the growing needs of UK homeowners; if it does not, the startling pace of prices in the capital may be a worrying barometer for the future of UK house prices in general.