Property asking price growth is slowing

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A number of reports over the last few days have focused on property asking prices and their growth over the last year. It would appear that the annual rate of growth now stands at just 2.3% which is the lowest since April 2013. Indeed for the month of February this figure is the lowest since 2009 which is a little concerning. So, why is property ask price growth slowing and what does this mean for the UK property market?

Property sellers conscious of overpricing

It is becoming more obvious that property sellers are becoming more concerned about the dangers of overpricing their properties. The problem is that if you over price your property, even in the hope of selling below the asking price, this does not compare well with properties which have been “reasonably priced”. While it would be wrong to suggest that the UK property market is in trouble it is also wrong to suggest we are in a market where you can price your properties towards the higher end. The concern and confusion regarding Brexit is hitting sentiment to a certain extent but it is really just these fine margins surrounding the asking price which can impact a potential sale.

If you also look at this from the angle of a real estate agent they want to shift a property at the best price as quickly as possible. They are fully aware that the market is not “over buoyant” so many are now advising their customers to be more realistic.

Are we in a buyer’s market?

If sellers are struggling to make property asking prices stick then it is probably safe to assume we are in a buyer’s market. That is not to say that buyers will flood the market in the short to medium term but there will be many waiting on the sidelines to cherry pick the best properties. It is often easy to forget that every additional day a property is on the market increases the finance costs of the seller. So, many will now be tempted to take just under the “realistic asking price” to close the deal, reorganise their finances and move ahead with their own plans.

One area which will no doubt increase in popularity in the medium to longer term is the buy to let sector. Even though associated costs have increased dramatically due to government tax changes, rental levels are still being squeezed higher due to demand for rental property. Therefore, if you can shave just a few thousand pounds off the purchase price of a property this will increase your theoretical rental yield and reduce your payback period. Even a relatively small improvement in the underlying rental yield can have a significant impact for the life of a buy to let mortgage.

Short to medium-term outlook

While we are unlikely to see the UK property market slip into any kind of recession it is difficult to see it pushing too far ahead in the short to medium term. We need to know where we stand with Brexit in the short, medium and longer term and the UK government needs to speed up the international trade agreement program which it has spoken of. The UK economy has performed admirably in light of the confusion and concern surrounding Brexit and even the likes of the European Union have been caught out by the relative strength. However, there are certainly challenges ahead and those brave enough, and able to look longer term, will no doubt see an array of bargains emerging in the property market.

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