Rightmove urges movers to act now before Christmas

This month is the third anniversary of the collapse of Lehman Brothers, which triggered the freeze in credit markets and wholesale mortgage funding. It is concerning that many of Rightmove’s key metrics have not changed since then—indicating that recovery still remains on hold until the lending squeeze eases. Given these market conditions and the 94 day average time a property is on the market, sellers seeking to tie up a deal in the 98 days left before Christmas need to take action now to undercut and out promote their competition.

Miles Shipside, director of Rightmove comments:

“New sellers are asking £7,255 less than they were three months ago, trying to strike a balance between maximising their returns and grabbing a buyer in the brief autumn selling season. Many buyers hope to move in before the Christmas break and enjoy their turkey in their new abode. With less than 100 days left before Christmas there’s an opportunity for some deadline focused movers to do their bit to get some action into a market that is still pretty moribund three years after
the financial fiascos that precipitated the downturn”.

Agents report that one of the reasons why the market lacks momentum is that prospective buyers do not feel any urgency to make an offer and conclude a purchase. However, prospective buyers looking to move before the festive season should note the short timescales involved. A further and more financially significant deadline is the ending of first-time buyer stamp duty relief on the 25th of March next year. The nil-rate threshold will fall from £250,000 to £125,000, so first-time buyers should be aware that they must have completed their purchase by that date to avoid paying stamp duty of 1% of their purchase price.

Shipside adds:

“It’s a tight but feasible deadline to find and be in a new home for Christmas. The stamp duty relief has more teeth to bite you in the pocket if you miss it, but that is a tasty incentive as long as you beat the deadline. There are a couple of opportunities here to get a sense of urgency into buyers, something that’s been sadly lacking since the collapse of Lehman’s put a seemingly indelible blot in the financial landscape”.

This month is the third anniversary of the collapse of Lehman Brothers, and many of Rightmove’s key metrics are little changed, so a housing market recovery seems as far away as ever. The number of properties coming to market this month compared to September 2008 is equally subdued, with a weekly run-rate of 23,412 this month, just 1.2% higher than the 23,131 in the same month three years ago. Forced sales remain low, so the market has not yet been forced to address the affordability issues that are preventing many would-be buyers from taking a more active role.

Shipside observes:

“The deposit-rich are able to trade up, but many mass-market rung-climbers are stuck in their current homes due to having insufficient equity to fund a large enough deposit for their next purchase. The good news is that low interest rates and static prices are keeping most of them out of the clutches of negative equity and forced sales, but those factors are also delaying a return to affordability and liquidity that would help to get the first-time buyer and volume markets moving again”.

New sellers’ average asking prices are also little changed compared to September 2008, when the average price of a property coming to market was £227,438. In spite of three years of unresolved financial uncertainty, this September’s sellers are asking £233,139, a difference of just 2.5% or £5,701. In the previous three year period from 2005 to 2008 prices went up from an average of £195,407, an increase of 16.4% or £32,031.

The relative shortage of property coming to market continues, helping to underpin prices. The improvement in new seller numbers measured in September 2010 now seems to have ebbed away, with the number recorded this September 10.3% down on last year. This is keeping in check the average unsold stock per estate agency branch which remains in the high 70s, though it is slightly up from 76 three years ago to its current level of 78 properties.

Shipside comments:

“It’s a delicate balance between the markets not being flooded with sellers desperate to sell and having enough of them to bring prices down to more affordable levels and encourage more buyer activity. Although local markets vary, at a national level it still seems that sellers have the upper hand in being able to hold out for higher prices. Buyers can retaliate by not buying, but do not have the power to force many sellers to take lower offers. The result is a stalemate and continuing stagnation in the number of sales transactions and successful moves”.

The market needs and seeks solutions to boost housing activity. Government proposals to liberalise local planning laws are partly justified by a view that they will promote economic activity as well as providing a greater supply of affordable homes to meet demographic needs. However, the lead-time before developments come to market means that any benefits will take several years to come to fruition. While catering for future needs, they will do nothing to boost housing market activity now, at a time when, arguably, the impact and need is greater. The recently launched new-build FirstBuy deposit assistance initiative is an example of an incentive that, while limited in number, has created considerable interest.

Shipside comments:

“Planning relaxation may help to boost housing market and economic activity in three or four years’ time, but it does nothing to help the market now. The continuing lack of attractive mortgage products with higher loan-to-value ratios is stalling a housing market recovery, as first-time buyers or existing homeowners with little or no equity are faced with years of saving to raise the necessary deposits. The risk is that the current turmoil in the financial markets, which would be exacerbated by a Greek default, could make lending criteria even tighter at a time when they appeared to be easing slightly”.

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