Miles Shipside, director of Rightmove comments: “Agents report that the Christmas slowdown has come early this year, as both would-be buyers and sellers are adopting a ‘wait and see’ policy until the direction of next year’s housing market becomes apparent. The combination of high unsold stocks, the mortgage famine, a shaky economy and the normal winter slowdown gives an ideal scenario for bargain-hunting buyers. The bleak mid-winter is always the best time to catch desperate sellers, and those buyers who are currently lying in wait may wish to pounce this winter rather than next”.
In spite of the current downward price trend, this month’s new sellers are still asking 1.3% more than those of a year ago. However, the price bounce is now working its way out of the annual figures. It originated when the large and surprisingly rapid 2008 downward price correction was followed by renewed demand from bargain-hunters and shortages of quality homes. Agents report that this price surge has now run out of steam in all but the most popular and affluent locations. As we forecast in December 2009 the price growth through the first half of the year has been reversed by price falls in the second half of the year. The earlier than usual fall-off in the numbers of both new buyers and new sellers indicates that many are sitting on the sidelines, waiting to see which direction the market is headed in the next few months. Rightmove
will be announcing its 2011 property outlook and price forecast in next month’s House Price Index, due for release on December 13th.
Shipside comments: “First-time buyers and buy-to-let investors both appear to have gone missing from estate agents’ books. Perhaps they are keeping their hands in their pockets in case their budgets go further in a few months’ time”.
The number of new sellers is falling away too, currently running at 24,028 a week. This is down 9.1% on last month as their enthusiasm to sell is perhaps blunted by the approach of Christmas and a deterioration in market conditions and consequently their pricing power. The Bank of England’s latest figures for mortgage approvals show that the ratio between new property supply and successful mortgage applications is still stuck at around 2 to 1. While not every property sells, and not every buyer needs a mortgage, the continuing restriction on the number of mortgages approved shows the on-going mismatch that is helping to cause stagnation in the market. However, some agents are reporting that these challenges are creating opportunities for those sellers who have got the message that their property is now worth less than it was a few years ago. It is the price to trade up that is the key factor, and if those further up the chain with greater equity are willing to drop their prices, this may complete the chain and allow more transactions to proceed.
Shipside adds: “Those buying as well as selling may have to reduce their price aspirations, but if they get 10% less on theirs whilst achieving a 10% drop on their purchase then they will come out ahead. However, if a lower price means that your equity won’t fund both your moving expenses and a large deposit, then you may be forced to stay on the sidelines. It takes two to tango, because if you expect the person from whom you are buying to cave in while still demanding the top price for your own property, your Christmas cards are unlikely to need a change of address”.
There is typically a rush of properties coming off the market as buyers strive to move in before Christmas. This seasonal rush is more subdued this year and average unsold stocks per estate agency branch remain unseasonally high, even though there are now fewer properties coming to market. The last two months have seen a slight fall from the record high of 79 properties per branch, but only to 78 last month, and now to 77. We have also seen a new record for the average time a property stays on the market, which has gone over 100 days for the first time in the history of the Rightmove House Price Index. These figures provide clear evidence of the lower levels of successful sales and transactions going through, leaving sellers with a high level of competition in most local marketplaces. Those that need to sell quickly will have to consider bargain basement prices to attract buyers distracted by both the state of the economy and the seasonal festivities.
Shipside concludes: “Buyers who are active in the winter market will have a plethora of choice, so their decisions will be based on bargain-hunting as well as on the usual criteria of location and quality of accommodation. This month’s large price correction shows that new sellers and their estate agents are beginning to show a heightened awareness of the plight of buyers, but a lot of stale stock is still sitting on the market. Some sellers have lost their motivation to move, but remain on the market hoping for that special buyer to meet their out-dated and inflated price. This winter, it is the sellers that need to be doing the tempting and those that get the message could deliver some bargains to those still looking to buy”.
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