Why the property drought is getting worse

The UK property drought is reaching crisis point, with the average estate agent noting a 20% drop in the number of people selling up since June. A property shortage like this causes problems ranging from sky-high prices to jammed housing chains - where eventually nobody is ready to complete a sale. In some areas, things are looking particularly dire.

Figures from housesimple.com show that new property listings fell 6.6% across in the UK in August, so that in the previous three months they had fallen a fifth altogether. However, in some areas the situation is even worse.

Over the past month Taunton has seen the biggest fall in the number of new listings - down 31%. This is followed by Lichfield where they have fallen 29%, Loughborough where they are down 28%, Chelmsford at 24%, Bedford at 22% and Hemel Hempstead where they fell 19%.
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Overall, the Midlands and the South of England were the worst hit regions - where 12 of the top 15 falls were based. However, London has also suffered. Since the start of June not a single borough has seen an overall rise in new property listings - and overall during the three months they fell 25%

Some of the falls in London in the previous month were particularly striking - with the number of new property listings in Kensington and Chelsea down 44%, Haringey, Camden and Bexley down 36%, and Newham, Barnet and Richmond upon Thames down 32%.

Why?

Part of the reason is purely seasonal. Alex Gosling, CEO of online estate agents HouseSimple.com says: "We would expect to see activity drop off over the summer holidays, so September will give us a better gauge as to how imbalanced supply and demand are right now. The hope is that after a summer when supply fell off a cliff, sellers will rediscover their appetite over the coming months."

In some parts of the country, including central London, we are also seeing the effects of a weaker property market. After decades of heady price rises in central London, we are seeing some of the heat come out of the market, and some prices falling back. The worst affected properties are down 20% from the peak - so it's no wonder that people aren't keen to sell up and lock in this loss.

However, some of this is also the result of a fundamental problem with the housing market. The building of new properties is simply not keeping pace with the demand from buyers, as builders are hampered by planning restrictions and infrastructure problems. The public sector has also moved away from building, so there are just not enough properties. With low interest rates meaning more people can afford to buy, it's no surprise that demand has exceeded supply to such a dramatic extent.

The effect

It's a nightmare for would-be buyers. Gosling said: "Across the country there are thousands of frustrated buyers, with finance in place, ready to purchase, but the property supply reservoir has dried up." In many cases these people have already sold, so their inability to buy has jammed up a property chain. Not being able to find anywhere to sell will either put the brakes on the entire chain, or mean their own sale falls through.

Of course, a shortage of supply also means that whenever anything does come onto the market, it is marked at a premium, and then bid even further upwards by desperate buyers. It means that buyers can easily see all their target properties disappearing out of reach.

We will have to wait to see whether the post-summer rush to sell helps ease the problem, or whether we're not going to get out of this period of drought until there's a real political will to make it easier to build.

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