Interesting comments from the Nationwide today. House prices (by their measure) have returned to 2008 levels with the average now standing at £161,816. Digging a little deeper, we see this interesting point:
“The surge in so-called ‘accidental landlords’ has limited the supply of property in the sales market and increased the stock of homes available to let. These differing supply trends have led to diverging price trends between the sales and lettings markets. Whereas house prices have risen by 4.1% year to date, the available evidence suggests that rents are currently lower than where they started the year, thus putting downward pressure on rental yields. Although the drop in yields has been offset by large declines in interest rates over the last year, one cannot expect rents and house prices to move in opposite directions indefinitely.”
They imply that the underlying upward pressure is due people changing their minds and selling their properties rather than letting them any more. My immediate thought on this is that there is a pretty finite supply of these ‘accidential’ landlords so this upward effect must be limited in duration. The same limitation that constrain the market are still in existence – namely the absence of proper financing funds (yes, I’m aware that there is still finance out there, but it can be tricky to get a deal that makes sense for most landlords at the moment).
Now, back to my main theme – has the market already bottomed out? The shift to sales does indicate confidence returning, which is a pillar of any market. Supply is still limited and there is likely to be significant pent-up demand amongst potential purchasers. Could it be that expecting things to return to the ‘old ways’ is unrealistic – is it simply that we’ve entered a new era, and the current level of funding restrictions will be the norm for the foreseeable future? If that is indeed the case, then perhaps this is as good as its going to get…
