Structural housing shortage results in not enough sellers and rising prices
Decades of inadequate provision of homes to satisfy demand are having an increasing effect, with a tight-stock market resulting in a shortage of quality property to trade up to:
– Average price of property coming to market up by over £5,000 this month (+£5,729/+2.1%), with all regions reporting uplifts
– Increase in demand for property continues with busiest ever January site traffic on Rightmove
– 31% increase in housing transactions in last two years in England and Wales, outstripping 11% rise in number of properties coming to market in same period
– Some agents reporting lowest ever stock of quality property for sale, as lower owner-occupation, buy-to-let investors not selling, and owners’ reluctance to ‘sell before you find’ contribute to a 4% fall in new seller numbers compared to same period in 2014
– Different tactics required for a successful move in a tight-stock market
We’re now over a month into 2015, and despite predictions that the upcoming May election could slow home-mover interest, Rightmove has recorded its busiest ever month for traffic and leads to agents. This demand has contributed to new seller asking prices being up across all regions this month, by a national average of over £5,000 (+£5,729/+2.1%). Decades of inadequate provision of homes to satisfy growth in demand are having an increasing effect, with a tight-stock market resulting in a shortage of quality property for sale to trade up to.
Miles Shipside, Rightmove director and housing market analyst comments:
“For the right property at the right price, demand is outstripping supply and leading to some further upwards price pressure. However there is a limit to what the majority are willing or can afford to pay, especially with the tighter lending criteria. In locations where there is a tight-stock market some different tactics are required for a successful move as competition gets fiercer for quality homes as demand increases.”
Housing demand is at a record high with visits to Rightmove hitting over 100 million in January for the first time ever, and home-hunters looking through a record 1.5 billion pages of property. New record busiest ever days were set on Sunday 25th and Monday 26th of January. Email and phone enquiries by home-hunters to agents on Rightmove hit 4.3 million for the first time, equating to around 100 enquiries every minute.
Quality stock is in short supply in some locations, which is unsurprising given the structural under-supply of homes and the recovery from the economic downturn. The 31% increase in housing transactions in the last two years in England and Wales has outstripped the 11% rise in the number of new properties coming to market. Rightmove statistics show that the average available stock for sale per estate agency branch for the last two months (57 and 58 properties) has never been lower at the beginning of the year. New seller numbers this month are also 4% below those recorded in the same period in 2014.
“Many who are contemplating moving will have noticed a lack of suitable property for sale in their area, and may be hoping that it’s a temporary shortage. What they may not fully appreciate is that this is the new norm, and is the consequence of over 20 years of not enough homes being built to meet the burgeoning growth in household numbers, resulting in a lack of quality homes for sale in many popular areas of the UK.”
Lower owner-occupation levels, down from a peak of 71% in 2003 to 65% in the latest figures, mean that this shrinking sector has less ability to meet the housing needs of those looking to get onto or trade up and down the property ladder. This is exacerbated by the massive growth of the buy-to-let investor sector, up by 2.6 million homes since 1996. Buy-to-let investors’ long-term investment strategy means they typically do not sell as frequently as owner-occupiers, resulting in reduced supply and choice for owner-occupier buyers in lower price sectors.
“More property could be effectively removed from the market when the buy-to-let sector sees a further boost from April, as agents are already reporting preliminary enquiries from retirees planning to cash in their pension pots and invest in buy-to-let properties to secure a steady inflation-proof retirement income. Agents also report a reluctance amongst owner-occupiers to put their property up for sale, as they can see little suitable to buy, though in truth selling first (subject to contract) puts you in the best position to secure your next home. Given that this is the likely shape of the market now and in the future, home-owners need to get their tactics right for a successful tight-stock market move if those are the conditions in the area where they wish to buy.”
Tactics for a successful move in a tight-stock market:
This might seem like an ideal time to sell with stock for sale being tight, but if you are moving up, down or sideways on the property ladder it also means it could be much harder to find your next property. While sellers might achieve a higher price, the property that they are buying is also likely to cost more. Selling subject to contract before finding another property and having an offer accepted sounds concerning to most, but with less property to choose from, a home-owner really needs to have a buyer for their own property or they will not be treated as a serious buyer themselves.
“You might think of postponing your moving attempt until there’s more choice available, but the likelihood is you will still have to contend with fewer available properties for sale in the future, unless by massive investment or magic we create more homes to match housing demand. The issue is down to a lack of private, affordable and social housing, and what it will take is a focus on long-term provision to address the nation’s housing needs.”
Advice for a successful move if there is a tight-stock market in your area: