As we predicted, the data from HM Land Registry shows that the market is slowing down. In the last three months for which we have a complete picture (August to October 2017), transaction levels were 11 percent lower than the same period in 2016. Curiously, the number of properties sold for over £1m rose by four percent, but given the difference represents just 200 homes, we don’t read too much into this. Things are cooling, but it could be a good thing.
All markets have fast and slow periods; it’s just a reality of economics. It’s a bit of a mystery as to why this happens, but generally, people participating in the market eventually start to feel like prices have gone up for long enough and try to sell at the top. Once the market reaches this tipping point, the sales-to-asking-price ratio starts to decline, and buyers hold off buying in the expectation of further price falls.
Then, when people think prices have hit bottom, they pile back in, causing the sales-to-asking-price ratio to start rising, and the cycle begins again.
What will this cycle be like?
Things are very different to last time when the carpet got pulled out from under our feet during the credit crunch. Mortgage lending evaporated overnight, and the market cycle ended in a very unusual manner.
This time it looks like we’re in for a much softer landing. Sign after sign indicates that the UK housing market is returning to its long-run equilibrium. Stricter mortgage lending is preventing a bubble, and sanity reigns supreme in the market.
But just because things are getting back to normal, that doesn’t imply that we foresee stagnation. We still expect that prices to rise in the premium market this year, probably close to experts’ projections for the mid-market of around one or two percent growth.
The people who gain the most out of the property market are those who make hard-nosed decisions at this point in the cycle, not the ones who ride the wave when things have already started picking up. And as always, those who work closely with a local market expert to find the hidden value in the market will come out on top.
Are you looking to sell your home in 2018? Get in touch with your local Fine & Country office today.
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