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Eurozone uncertainty hits seller numbers and prices

Those that have chosen or been forced to sell have dropped their prices by £7,528 (-3.1%) in the last month, only the third fall so far in 2011 but the biggest monetary fall since December 2007.

Miles Shipside, director of Rightmove comments:

“Markets dislike uncertainty, and so do people who are deciding whether or not to enter the property market. Agents report that many would-be sellers are postponing their marketing until the new year, influenced by the current wall-to-wall media coverage of the Greeks and Italians attempting to get their own far-flung houses in order. It’s no great surprise that those who have braved the stormy conditions have had to accept a substantial ‘haircut’ on their asking prices”.

The month-on-month fall of 3.1% is the third largest in percentage terms ever recorded by Rightmove. Though it reported a 3.2% fall last November, this year’s price drop is coupled with a substantial fall in the number of new sellers. New listings are down 11% on the same period a year ago. The current weekly run-rate of 21,375 new properties coming to market is the lowest recorded in November since the Lehman Brothers crash-affected period in 2008, when it was similarly depressed at 20,098. Such a shortage would typically be expected to help support prices, but, unusually, coincides with the third largest percentage fall ever measured.

The lack of fresh sellers and the large price fall indicate that the current negative economic outlook has caused the seasonal slowdown to come early this year. This lead indicator of consumer inactivity from the housing market will raise concerns in other sectors of the economy that are reliant on consumer spending. All regions are showing monthly price falls, the first time this has happened for over three years. However, with lower levels of new listings, especially in higher price brackets, there is some volatility at a regional level. The overall theme of a more buoyant market in the south and a harder-hit north remains, though there is nationwide consensus that the balance of power tips further still against sellers.

Findings from the Rightmove Consumer Confidence Survey for the fourth quarter show that 70% of home movers feel that it is currently a bad time to sell. Interestingly, they also hold the view that sellers’ travails give buyers much improved negotiating power, with 61% stating they felt it was a currently good time to buy.

Shipside observes: “While most home movers will have seen some foreign prime ministers losing their jobs, they will be much more keenly aware of the unsettled outlook for their own employment locally. When you are busy looking over your shoulder, you are unlikely to think it is a good market for selling. However, that does mean there are opportunities for those who are able to buy, especially as the earlier than usual seasonal slowdown will leave sellers who have to sell in an even weaker negotiating position. Those who are looking to trade up should not lose heart however, as while you may have to accept a lower price for your own property, you should be able to negotiate a good deal on whatever you are buying”.

Those who are highly motivated to sell will have to prepare for a longer period of subdued buyer activity before the market traditionally picks up in the new year, especially in locations where there is an oversupply of property for sale. Average unsold property per estate agency branch has fallen from 78 properties to 75 in the past month, with properties coming off the market as buyers move in before Christmas. We would have expected it to fall more rapidly given the low level of new listings coming to market, and it is further evidence of the subdued number of sales.

Some winter buying opportunities in areas of oversupply will be available for bargain hunters, and interestingly
many agents report that buying activity is on the increase from investors. Buy-to-let investors looking to raise finance for new purchases are benefitting from increased lender competition, resulting in higher loan-to-value ratios and lower interest rates. With over half of tenants expecting rents to be higher in 12 months’ time, according to a recent Rightmove survey, investors will be feeling more confident about improving yields too. They have the benefit of greater access to finance than first-time buyers, with whom they are often competing when buying, and the ability to pay down the mortgage more quickly due to the prospect of improving rental returns.

Shipside adds: “Reports suggest that buy-to-let mortgage approvals are at their highest for nearly three years. With good prospects for long-term tenant demand from those that cannot buy and consequently solid rental returns, investors will be looking forward to seeing sellers suffer a longer than usual buyer slowdown this winter. The result is a window of opportunity for buy-to-let investors to bag some bargains, spend less on finance and charge more in rent”.

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