The onset of the Autumn moving season sees new sellers asking an average of 0.6% more for their properties. Rightmove has also recorded the lowest average stock levels per branch for 18 months, with 29% more properties coming off the market than coming to the market. The lack of choice in popular areas and high deposit requirements are combining to deter existing home owners from taking advantage of more buoyant market conditions to trade up.
Miles Shipside, commercial director of Rightmove, comments: “There’s an Autumn window for new sellers where a sensible asking price combined with this better market could get you traded up into your next home before Christmas. Some would-be sellers may be concerned by the limited choice of suitable property currently available, and will have to decide whether to take a chance on finding something fresh to the market after they have found a buyer. This increases the risk and stress of moving, but with choice getting increasingly limited in popular areas they need to have a buyer lined up to improve their chances of securing their next home”.
The brisker market continues to erode stock levels as sold or withdrawn property is removed from the market. One agent’s summary of trading conditions in August was: “Sales awesome, new listings dreadful”. The average unsold stock per estate agency branch has dipped to 69, after 17 months in the 70s. This is the lowest level since February 2008. With circa 20% fewer branches than in 2008, the fall in stock levels is made more pointed. New seller numbers are averaging around 23,000 a week, giving a run rate of around 1.2 million a year. Historic figures from Rightmove show that potential buyers have previously enjoyed a choice from around 2 million properties a year. With 151,591 properties measured as coming off the market this month, it is easy to see why property scarcity in popular areas is underpinning price levels.
The above trend is particularly evident in the south of the country, where year-on-year measurement shows that the four regions are either close to breakeven or higher than this time last year. Average asking prices in the South-East are 0.4% higher than a year ago, with East Anglia 1.5% up. The South-West and London are within 1% of breakeven, with prices just 0.1% and 0.9% lower respectively. These regions find it easier to create a virtuous circle of buoyant demand and pricing as better-heeled buyers are drawn to well-heeled areas. In contrast, the more northerly regions all remain more firmly in negative territory. Less deposit cash, coupled with locations that are less of a magnet, limits the scope for price recovery.
Shipside explains: “The recession appears to have hit prices harder in the north, and this is compounded by lenders’ more conservative attitude to risk. Lenders quite naturally prefer to lend to lower risk borrowers in better locations, with better job security, larger deposits and more resilient property values. Indeed it becomes a self fulfilling prophecy, keeping the best areas more buoyant and making it harder for depressed areas to bounce back”.
Evidence that trading up is the domain of the cash-rich comes from the latest Rightmove Consumer Survey of potential movers’ circumstances. With 53% of those polled stating that they had over 50% equity in their existing homes, it illustrates that the current activity in the property market now depends to an unhealthy degree on those with substantial equity. This is exacerbated by some non-state-backed lenders competing to target this group with very attractive rates, rather than contributing to the wider health of the property market by assisting more first-time-buyers. This cherry-picking may be good for their internal risk management, but also risks prolonging a thin market, which could herald further price falls in areas starved of finance. More competitive mortgage deals at up to 90% of the purchase price are required for transaction volumes to recover substantially.
Shipside adds: “Many aspiring sellers could face years trapped in their homes until values rise enough for them to join the equity-rich club, and even then they will be heavily dependent on the number of bottom-of-the-chain first-time-buyers. Confidence is up, stock is down, and the number of people searching is high. There are lots of positives but too few buyers can put down the 40% deposits that are needed in order to secure the best mortgage deals. Finance greases the wheels of the property market, and it is anybody’s guess when we might see the necessary level of competitive funding return. Frustrated home-hunters should note the expected ten year timetable to wind up Lehman Brothers, giving a clear indication of the time required to rebuild the banking system.”
Some would-be sellers may be concerned by the limited choice of suitable property currently available, and will have to decide whether to take a chance on finding something fresh to the market after they have found a buyer....
Confidence is up, stock is down, and the number of people searching is high. There are lots of positives but too few buyers can put down the 40% deposits that are needed in order to secure the best mortgage deals....