Chronic short supply threatens a healthy property market

Demand and deal levels are rosy, according to Hamptons,which reports strong August sales and ever-increasing numbers of new applicants. But slack growth in the quantity of new properties hitting the market could scupper hopes of a smooth and lasting recovery, says the agency.

House sales in August were up by a third compared with last year, continuing the buoyant trend of the last five months; the number of new applicants registering to buy in August was up by a quarter compared with last year, and growth in demand has been up by around 30% for the past five months.

A much happier economic outlook, combined with a healthier mortgage market and some certainty that interest rates will stay low for some time to come, have “set a great background for a continued sustainable recovery in the housing market.”

Marc Goldberg, Hamptons’ Head of Residential Sales at Hamptons International: “The market conditions are ideal for those looking to sell and the best we have seen for several years.  There is an abundance of motivated buyers and fewer properties available which is allowing us to sell our properties swiftly and at high prices.”

The supply-side is not, however, looking so good. Hamptons’ rate of growth of new instructions has been slower than buyer registrations for some time, and the gap has been widening since the spring. In August instructions to sell were down by 14% compared with last year.

In London, the worst affected region, Hamptons has 18% fewer properties available for sale compared to last year. Year on year, new instructions fell by an average of 12.5% over the last three months. Take the 9% increase in sales over the same period, and the short supply problem looks even more troubling.

It’s a similar story across the South of the country: the agency’s stock levels are down by around 11% compared to 2012, but the number of new applicants is up by 25% and sales are up by almost 40% in the same period. It can’t, in the long term add up.

Fionnuala Earley, Hamptons’ Research Director: “It’s not just a lack of supply of new homes that threatens a stable housing market. Without sellers of existing homes coming to market too, a smooth recovery is at risk, despite brighter economic conditions and improving mortgage credit conditions.

“A lack of homes for sale combined with rising demand can only mean that prices will rise, and that risks choking off the fragile recovery we have been enjoying in the last few months.”