Why has supply of properties dropped?

Hi Marcus

My take on this is that there has been so much media hype about a property boom that people are hanging on and waiting for it to happen.

People want to buy before prices shoot up and other people are not selling until they do.

There is massive pent up demand from people needing a larger property due to having children etc. but they are trapped in negative equity so they need prices to rise in order to raise a deposit to move on. Those looking to downsize realise that 20% more for their big house will equate to a lot more money than a 20% rise in value of a smaller property so they too are hanging on.

This could turn out to be a self fulfilling prophecy on the basis of supply and demand.

As you say, when a property does come onto the market there is a frenzy. How long will it be then before sealed bids and gazumping becomes fashionable again? I am already seeing distressed bungalow selling for as much as 20% over the asking price in mid-Norfolk so this phenomena is not just restricted to London or even the South East. Whether it will eventually spread to the north is another matter though!
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Reply to the comment left by "Mark Alexander" at "29/01/2014 - 10:35":

Thank you Mark for your thoughts on this phenomena ! I guess in London, certainly in the suburban areas where I've noticed the 'buying frenzy', hardly any will be in negative equity. However I think your point about people who are looking to downsize is spot on though I've noticed a dire lack of 2 bedroom flats which may not be prime candidates for downsizing. 'Help to buy' could arguably explain the surge in buyer interest but I (along with nearly every estate agent I ask) am still perplexed as to why the sellers have disappeared so abruptly and what needs to happen for that to reverse.

Besides the expectations of the future increase. People have extended upwards, side ways etc to accommodate the growing family due to high cost of moving including high stamp duty, price, lack of competitive mortgage products to name a few.

People who had to sell for reasons beyond their control had already done so. The ones who do not need to sell while they are getting a decent rental yields, high capital gains tax, will not place their properties on the market.

There are various reasons and factors which include that some people are still in negative equity and cannot afford to sell yet, so waiting for prices to rise a bit more.

Others are also preferring to extend their current properties than move.

These are very strange times in U.K. property and, when I put a North London flat on the market this week, I will certainly report back on the demand for it. 🙂

It does seem odd, as for several years we had an opposite pattern, at least in the South: people put their properties on the market, there was an over-supply and properties could sit for months without a viewing, prices looked in danger of falling, and people would take their properties off the market so the number of units per estate agent fell back again. There was a self-correcting mechanism at work, with no crash because most people didn't *need* to sell.

Then things went a bit mad last year: mortgage cost and availability improved, properties in my area (Oxfordshire and Berkshire) started moving really quickly, and over the summer you couldn't get a mortgage survey completed in less than three weeks, due to too much demand and not enough surveyors.

Perhaps there was a big clear-out last year of people who were keenest to sell and buy, Help to Buy helped at the cheaper end to free up a lot of chains, and now the market is taking a breather until the spring.

Perhaps also people are waiting to see what mortgage offers come out with Help to Buy, now the pre-owned market under £600K is eligible?

HTB (new build) must have contributed to a release of pent up demand. As enabled chains to be built. After initial burst has settled back down. Along with the fact that FLS has effectively been withdrawn so funding lines will diminish.