Key to Help to Buy success is unlocking trapped sellers to boost supply
August’s 1.8% (-£4,459) drop in new sellers’ asking prices is the first monthly fall recorded in 2013, though the recovering market means the traditional holiday season price dip is less pronounced than usual.
The underlying recovery in the housing market continues, with the price of property coming to market up by an average of 8.8% (+£20,210) in the first eight months of the year. Buyer demand is set to increase further when Help to Buy starts assisting purchasers of second-hand property in January, highlighting the need for greater property supply to meet growing demand and mitigate unsustainable upwards price pressure.
Miles Shipside, Rightmove director and housing market analyst comments:
“Even with this month’s below par 1.8% fall, the national average asking price is still up by more than £20,000 so far in 2013. Demand is already on the up, and that’s before the roll-out of phase two of the Help to Buy stimulus. It is now critical that the supply of property improves so that the goal of a significant increase in transaction numbers is not over-shadowed by an unsustainable boom in property prices.”
The peak holiday month of August is traditionally volatile, with asking price falls recorded every year since 2007. Fewer sellers come to market, down 8% on last month, with discretionary sellers more focused on holidays and content to wait for the busier Autumn selling season. Sellers who do come to market during August tend to have a more pressing reason to sell and consequently price more aggressively.
“The underlying recovery in the housing market continues, with the price of property coming to market up in seven out of the first eight months of the year. However, outside of London and the South East it is weaker than the 5.5% annual gain headline figure suggests. Prices in the capital are 10.2% higher than this time last year compared with an average of just 2.8% for the rest of the country. While prices are up, transaction volumes still remain constrained by risk-averse lenders’ high deposit requirements and a lack of choice for buyers”.
We are already seeing early signs of demand outstripping supply and the Government needs to ensure that the current new build Help to Buy scheme, and its extension in January to second-hand homes, deliver more properties onto the market as well as boosting demand. The number of properties coming to market so far in 2013 is up just 0.2% on the same eight months in 2012, an increase of just 1,664 properties. However, this marginal improvement in fresh supply is outstripped by a 5% jump in transactions and a 17% annual increase in email leads to agents and developers from Rightmove so far this year. The natural lag between an increase in demand and a corresponding increase in supply could cause a short-term step-up in house price inflation over and above what is currently being seen. When, or if, property supply responds will be key in determining how long and how marked any inflationary period might be.
It is therefore vital that the Government’s communication around the January extension of Help to Buy encourages sellers to take advantage of increased demand and put their property on the market, thus increasing supply.
“The clear message is that only if the supply of property increases to meet rising demand will we see a boost in transaction numbers that will mitigate the ‘collateral damage’ of upwards price pressure. Developers’ reaction to the new-build Help to Buy scheme must start to address the structural shortfall of the last two decades and increase the number of houses being built. A second key success measure will be an increase in the supply of property to market from those who have put their housing needs on hold since 2007. It is vital that the new scheme frees low-deposit trapped-sellers, encouraging them to come to market and helping to unlock supply shortages.”