Miles Shipside, of Rightmove, comments: “The number of new mortgages being approved each month is less than half the number of new sellers, with the imbalance being exacerbated by the increase of nearly 50% in the number of properties coming to market compared to a year ago. More aggressive pricing is now the order of the day, which means that conditions are ripe for a strong buyers’ market in the second half of 2010.This is likely to see the average price gains of 7% for the first half of the year wiped out by year-end, in line with Rightmove’s original forecast for the year of no net change in prices”.
The end of spring traditionally heralds a tougher time for sellers as the market goes into recess for the summer.
The 123,507 new sellers that Rightmove has recorded coming to market in this month’s index have reacted by
asking an average of 0.6% less for their property than the month before. This is the first month-on-month fall in
2010, and with the likelihood of more economic pain to come, we forecast further downward pressure on new
sellers’ asking prices. Average asking prices increased by £15,506 (7.0%) in the first six months of this year from
£222,261 to a peak of £237,767 in June. While there will be some major variations between different local housing
markets, we predict the national average will fall by a similar amount by year-end, reversing the gains recorded in
the more buoyant first half of 2010. Sellers will need to continue to be more realistic in their pricing, as the
number of mortgage approvals seems rationed at around 11,000 a week compared to the consistent weekly runrate
of circa 30,000 newly marketed properties. A mortgage is not required for every property on the market, as
around half of all properties are either withdrawn by the seller or purchased by cash buyers. However, the inability
of demand to keep pace with supply as buyers struggle to obtain a mortgage is shown by the continuing rise in
available stock per estate agency branch. The spring buying season has failed to stabilise agents’ stock levels, with
an unseasonal rise from 74 to 77 unsold properties per agent this month widening the choice available to those
buyers who can proceed. This is the fifth consecutive monthly rise and the highest stock level since August 2008.
Shipside adds: “Estate agents are suffering from podgy portfolios, and buyers’ fitness to purchase is in
correspondingly poor shape. With agents beginning to choke on a surfeit of new stock, sellers are going to have to
price at bargain levels and bullishly promote their properties in order to stand out from the crowd. Those sellers
that act more quickly will be able to lock-in some of the price gains made in the last eighteen months. However,
the tradition of testing the water at a higher figure before reducing at a later date will backfire in areas of excess
supply, as over-ambitious sellers will have to cut back even more as they chase prices downwards”.
Agents report increasing reluctance by cash buyers to make up the shortfall in the number of first-time buyers. By
their very nature, professional property investors tend to make more rational and less time-critical buying
decisions than more emotionally driven owner-occupiers. With the recent Budget posing threats to investor
returns due to the increase in Capital Gains Tax and the proposed cap on Housing Benefit, investors will be looking
for an opportunity to acquire future assets more cheaply. They may choose to wait and see if the contraction in
public sector employment and faltering confidence among the wider home-buying public offer up better returns.
Early indications from the next quarterly Rightmove Consumer Confidence Survey, due out in August, suggest a
swing to a more negative outlook on the future direction of property prices. In the April survey, before the election
and emergency Budget, fewer than half of respondents (44%) believed that prices would be the same or lower in
twelve months’ time. Of those surveyed so far in July, a majority (54%) now expect that prices will be the same or
lower a year out, reducing for some the sense of urgency to buy.
Shipside comments: “Consumer sentiment is a major influence on the housing market and, while many would-be
owner-occupiers are not swayed by short-term negativity or dips in prices, many harder-nosed investors will
decide to circle and wait. The second half of 2010 could see some more motivated sellers falling into some canny
buyers clutches, as conditions are looking ripe to pick up some good buys”.
Potential buyers are keeping a beady eye on the market and seem to be looking for the right buy at the right price.
In spite of the distraction of the World Cup, Rightmove recorded an average of almost 20 million pages viewed per
day in June – up by 11% compared with the same period a year ago.
Shipside comments: “Internet search activity is a strong indicator of pent-up demand. Rightmove’s high traffic
shows that potential buyers are searching, but with prices in some areas set to drift back they are likely to be
looking for sellers who are offering tomorrow’s prices today”.
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