Housing market is starting to show signs of ‘cooling off’

Original Source: https://propertyindustryeye.com/91598-2/

Author: MARC DA SILVA

The annual growth in property prices may be strong, but there are growing signs that the housing market is starting to run out of steam.

The latest data from the Office of National Statistics (ONS), based on completed housing transactions, shows that residential property prices hit a record high of £245,000 in October 2020, following annual growth of 5.4%, up from 4.3% in September 2020.

On a non-seasonally adjusted basis, average house prices in the UK increased by 0.7% between September and October 2020, compared with a fall of 0.3% during the corresponding period a year earlier.

The UK Property Transactions Statistics showed that in October 2020, on a seasonally adjusted basis, the estimated number of transactions of residential properties with a value of £40,000 or greater was 105,630. This is 8.1% higher than a year ago. Between September and October 2020, UK transactions increased by 9.8% on a seasonally adjusted basis.

House price growth was strongest in Scotland where prices increased by 6% in the year to October 2020, up from 4% in the year to September 2020. The lowest annual growth was in the East of England, where prices increased by 3.4% in the year to October 2020, down from 4% in the year to September 2020.

However, there are signs that the housing market is showing signs of “cooling off”, according to Nicky Stevenson, managing director at Fine & Country.

She said: “It was never the case that this unexpected pandemic mini-boom would continue forever and we’re already seeing signs of this property frenzy cooling off.

“In fact, a lot has changed in the past two months. The initial surge of buyers motivated by a desire for more space and the chance to capitalise on the stamp duty holiday has already now passed.”

Stevenson pointed out that the latest data from Rightmove, released earlier this week, revealed that asking prices have dropped by 0.6% in December, in a “second monthly decline”.

The housing market is widely expected to slow next year, with some commentators predicting a slump in property prices, but Stevenson told the press that she is hopeful that, based on the latest data, “a hard landing” can be avoided next year.

She added: “Significant outright price falls remain unlikely in 2021, although the appetite for larger properties is here for the long haul and will continue to disguise the underlying performance of the market to some degree.”