• London's Best / Worst performers
• London time on market indicator
• Breakdown by London boroughs

London's Best / Worst performers House Price

London time on market indicator

Breakdown by London boroughs

• Asking price trends
• Asking price changes
• Time on market indicator
• Average stock per agent

Miles Shipside, commercial director of Rightmove comments: “In all but the most buoyant of markets, home moving comes second to Christmas festivities. While the market has recovered from some dreadful lows, this month’s price fall proves that it does not yet have the strength to buck seasonal trends. We therefore expect three months of asking price falls before a tentative recovery in early spring, likely followed by pre-election jitters”.

Market volumes remain thin, with the number of new sellers measured in this month’s House Price Index at 89,140. The number of properties coming to market is now similar to the level recorded at the same time last year, though still some 30% below the volumes we saw in 2007. While this shortage of stock has helped prices to stabilise, and then begin to recover, lower volumes mean that fluctuations due to seasonal volatility are exaggerated. People who can choose the timing of their move tend to own the better-quality and more expensive properties, and they are naturally reluctant to come to the market over the summer holidays or in the run-up to Christmas. Accordingly, we saw prices fall over July and August, recover in the early autumn as more properties came to market, and now fall again as Christmas approaches.

The low volumes of both transactions and new property listings mean that liquidity in the housing market remains restricted, despite the snail’s-pace recovery in mortgage availability that we have seen throughout 2009. This poor liquidity is affecting the wider economy as it impairs both workforce mobility and efficient utilisation of the housing stock, with many people stuck in homes that are too large, too small, or in the wrong place for their jobs.

Shipside adds: “Many would-be sellers are still unwilling or unable to come to market, and with the number of new build properties running at half of the levels required to satisfy anticipated demand, aspiring home-movers are set for a frustrating time for years to come. Norman Tebbit once urged people to get on their bikes and look for work, but it’s much more difficult for homeowners to take up jobs in other parts of the country if they have insufficient equity in their current property to get a new mortgage at a competitive interest rate.”

The extent of the market recovery from the dramatic price falls seen last year is shown by year-on-year price rises in seven out of ten regions, resulting in an average national rise of 1.6% compared to November 2008. A majority of the country now has average asking prices that are above those of twelve months ago. Only the East Midlands, the North and the North-West remain in negative year-on-year territory. The East Midlands is the worst performer with prices 1.6% below those of November 2008, with the North down 0.6% and the North-West just short of breakeven at minus 0.1%. The southern regions show the largest increases, with the South-East leading the way with an average rise of 3.8% driven by the lowest average stock levels per estate agency branch. At the other end of the scale, the three regions still in negative year-on-year price territory have the highest stock numbers per estate agency branch.

Shipside comments: “The shortage of stock is worse in the south than it is in the north, leading to greater upwards pressure on prices due to higher numbers of willing and able buyers who have fewer properties to choose from. Recoveries tend to start in the south, and with mortgage lenders favouring buyers with larger deposits and greater job security, it is no surprise that the trend has been repeated this time round. With parts of the north of the country also clawing their way back to a year-on-year price standstill, we recorded an average annual national rise of £3,461. That would have looked pretty far-fetched a year ago”.

The stamp duty holiday, exempting properties between £125,000 and £175,000 from the 1% tax, is due to end on 31st December. Analysis of Rightmove’s data shows that its impending demise has not caused a rush over the last three months by sellers or buyers looking to take advantage of this tax break. The proportion of new-to-the-market sellers of properties in this price bracket has remained static at 24% over the last three months, with overall stock levels between £125,000 and £175,000 also remaining consistent at 23%. In times when lenders required smaller deposits, a saving worth between £1,250 and £1,750 would have made a difference to a lot more home-movers. However the mortgage famine means that it hasn’t had much impact on buyers, who need to raise deposits of 25% or more to qualify for the better mortgage deals.

The negative impact of the withdrawal of the stamp duty holiday may outweigh its limited positive impact, as the property market will remain fragile in the new year. We expect that market liquidity will remain poor, with low volumes of new listings and transactions. This is due to political and economic uncertainty around the election, continued slow improvement in mortgage availability, and the withdrawal of the temporary concessions on stamp duty and VAT. Price trends in the first half of 2010 will thus continue to be dominated by seasonal factors, with a “spring bounce” in prices expected from February as we enter the traditional home-moving season.

Shipside adds: “Buyers hopeful of beating the stamp duty deadline should not leave it to the eleventh hour, especially if their legal team are not working over the festive break. We may yet see a last-minute rush of transactions, but the balance of property availability in the exempt band remains virtually unchanged. The incentive has been rendered almost irrelevant by lenders’ high deposit requirements. However, its withdrawal adds to the uncertainty surrounding the property market in 2010, which will also have to cope with the slowdown that an actively contested election always brings”.

	% Change in month	% Change Past Year	Ave house price
Nov HPI	-1.6%	1.6%	£226,440
Oct HPI	2.8%	0.2%	£230,184

Key points

View Index comparison

• London's Best / Worst performers
• London time on market indicator
• Breakdown by London boroughs

London's Best / Worst performers House Price

London time on market indicator

Breakdown by London boroughs

• Asking price trends
• Asking price changes
• Time on market indicator
• Average stock per agent

Miles Shipside, commercial director of Rightmove comments: “It’s a little bit crazy to have a sellers’ market given the time of year and the warnings of imminent fiscal austerity by all the main political parties. Agents in the north as well as the south are reporting that quality properties are often selling within the week. Buyers are ready to pounce on new instructions and are willing to proceed as they believe prices have bottomed, and more are finding the ability to put down the larger deposits required to access the best mortgage deals”.

As well as the largest rise seen in October since 2003, 2.8% is the biggest rise measured in any month since February 2008’s 3.2%. A rise of this magnitude is more commonly seen in spring, when market optimism combines with demand fuelled by winter inactivity. Following last autumn’s acute shortage of transactions, the market has seen gradual recovery throughout 2009. Mortgage approvals have grown year-on-year from circa 32,000 a month to 52,000, yet the supply of properties coming to market has not seen corresponding growth, resulting in upwards pressure on prices. This month sees national average asking prices at a higher level than a year ago, the first time Rightmove has recorded a year-on-year increase since June 2008. The 0.2% rise is led by a strong recovery in London, where property shortages and increased buyer demand see asking prices now the highest Rightmove has ever measured. They are 0.8% above their peak of November 2007 and 5.2% higher than this time last year. Lack of fresh stock is the driving factor behind this record high, with 16,808 properties coming to the market this month, failing to keep pace with the 19,890 coming off.

Shipside adds: “London generally leads the country out of property recessions, as underlying demand remains strong in the capital city. Agents report a frenzied market in the best locations with supply at a premium, and buyers competing hard. Opportunities to buy cheaply in one of the most popular capital cities of the world may come along once in a decade. With prices lower due to the financial jitters in the City, combined with the weakness of the pound, foreign buyers are on a shopping spree”.

Further evidence of the improvement in buyer sentiment comes from the latest Rightmove Consumer Confidence survey, which will be released at the end of the month. Analysis to date shows that only 1 in 10 of our sample of over 30,000 respondents believes prices will be lower one year out, a massive turnaround from the beginning of the year when nearly 7 in 10 were of that opinion. Indeed, more than half expect prices to be higher, rather than just levelling off.

So, it would appear all is positive with prices stable or increasing across the country and mortgage availability improving, albeit slightly. This positive picture is, however, hiding some fundamental weaknesses in the current housing market.

Shipside comments: “Sellers in popular areas are back in the driving seat, though they should watch out for icy conditions ahead, as the market is likely to enter a pre-election freeze by spring next year”.

Current price recovery is based on an unusually thin market with transaction levels still 54% down on 2007. Ongoing lack of supply is driven by home owners deciding not to move given the current economic backdrop. Forced sales also remain subdued due to historically low interest rates and the effectiveness of forbearance schemes, allowing most home owners facing financial difficulties making mortgage repayments to remain in their homes. This lack of supply to the market has now compensated for the downward pressure on asking prices caused by low mortgage availability.

However, the problem with a thin market is that the impact of both positive and negative changes in economic fundamentals are magnified. Hence, any change in either supply or demand over coming months will have an exaggerated impact on house price indices that are currently being calculated on historically low volumes. This is particularly important when one considers what might happen during the rest of 2009 and the first half of 2010.

Shipside adds: “Political uncertainty can cause a period of slower activity in the housing market, and there appears to be a lot more at stake at next year’s general election to make would-be movers pause for thought. Now could be a good time to sell, as the spring market could be curtailed by pre-election paralysis, with the post-election market dampened by the next Government having to implement its austerity package”.

Despite signs of apparent stability, ministers and shadow ministers returning to Parliament following the party conference season must think very carefully about the likely impact on the housing market of short and medium term decisions:

· Stamp Duty and VAT – Stamp duty holiday due to end, and VAT due to rise on January 1st, giving aspiring and existing home owners less funds for house purchase

· Election – Hesitancy in housing market activity before and after election

· HIPs – Sellers may decide to hold off marketing if they anticipate a change of Government will reduce the requirements and costs for Home Information Packs

· Austerity – The effect of post-election fiscal tightening on people’s housing decisions and needs

The Chancellor’s autumn pre-budget report is likely to enlighten us with regard to the withdrawal of the temporary stamp duty exemption for property transactions between £125,000 and £175,000. Sudden changes in taxation can cause serious short-term distortions in the housing market, as was seen in both 1988 with the withdrawal of double mortgage interest tax relief and in 1992 at the end of the last stamp duty holiday. Any rush to transact properties before the planned December 31st deadline will be made
more difficult by the Christmas holiday season and may cause a further shortage of supply in early 2010.

The number of new properties measured in this month’s index remains subdued at 94,629. This represents a 36% decrease on the numbers measured 2 years ago as reduced equity, unwillingness to take on more debt, restricted finance and lack of property choice combine to dampen prospective buyers’ and sellers’ appetite to move. This perhaps suggests that now is not the time to reduce the threshold.

Shipside adds: “Sellers of properties which benefit from the temporary stamp duty exemption form a substantial sector of the market. They will be hoping that buyers who are unable to transact at the moment will maintain their interest into the New Year when properties are effectively 1% more expensive. It gives the market a second politically-induced challenge in 2010, with any post-stamp-duty holiday blues coinciding nastily with the general election”.

In the medium term all the main political parties agree that, post-election, tighter fiscal policy will be required to pay off the national debt built up during the recession. It is almost a given that this will lead to a reduction in public sector employment and higher taxation. In these circumstances, political pressure on lenders to continue the Pre Action Protocol to keep defaulting borrowers in their homes will be an important factor in preventing a forced-seller-induced downwards price spiral. A potential change of Government always adds uncertainty to the property market, a fact often forgotten with elections several years apart. The stakes are higher this time round with unprecedented Government intervention in the banking and lending sector.

Shipside concludes: “The combination of economic hardship, pending taxation decisions and an imminent general election could stamp out the early stages of a housing market recovery. There are some tough calls over the coming weeks in terms of taxation. We will then see political uncertainty around the election posing a further challenge to the housing market. This time round the slowdown could be complicated by the need to cut back spending and the major differences between the parties on the future of Home Information Packs.”

	% Change in month	% Change Past Year	Ave house price
Oct HPI	2.8%	0.2%	£230,184
Sep HPI	0.6%	-1.5%	£223,996

Key points

View Index comparison