However, they are faced with the lowest level of new supply per estate agency branch that Rightmove has ever recorded – an average of less than one new listing per branch per week.
Miles Shipside, director of Rightmove comments: “Old records are being shattered as search activity is up by a staggering 27% on this time last year. Potential buyers and sellers are looking more often and researching more thoroughly. In areas where there is a lot of property up for sale, buyers are looking hard for properties that tempt them with something really special in terms of value, potential, location or quality of finish. If it doesn’t shout ‘special’ then they are unlikely to overpay for the privilege of buying an average property in these mortgage-constrained times. In locations where there is little stock for sale, they appear to have become online junkies, ready to pounce on fresh property coming to market to see if it will satisfy their housing need. This search-addiction is in part caused by each estate agency branches currently listing an
average of less than one new property per week, an all-time low and around half of pre-credit crunch levels.
The market is stuck in a low transaction volume pit that will be hard to escape from without the mortgage funding to satisfy what appears to be strong pent-up demand.”
There have been more than 44 million property searches on Rightmove during the first ten days of 2012.
While this doesn’t necessarily indicate a surge in proceedable buyer numbers, it does highlight a strong pent up demand to move and is also a reflection that value-seeking buyers who can proceed are taking extra care to research the market. It also emphasises the fact that, were a larger number of mortgages available to the market, the interest, confidence and necessity to buy would lift the current muted sales transaction numbers from the virtual subsistence level of the last three years.
As well as less property coming to market there is less available stock already on the market compared to the same period last year. Average unsold stock per estate agency branch is 66, the lowest we have measured since February 2010. The 36,433 properties coming to market this month equate to an average of less than one new listing per branch per week. This is the lowest recorded in the ten years of Rightmove’s House Price Index and around half of pre-credit crunch levels. Agents report prospective sellers are being deterred by a combination of a shortage of confidence, lack of choice of property to buy and restrictive mortgage lending.
Depending on local market conditions, there will be differing pressures on the direction of prices. The lack of property coming to market in some areas will help to underpin new sellers’ asking prices in those locations, especially as estate agents compete to attract fresh stock for the new year. January often sees the beginning of a ‘spring bounce’ in the asking prices of properties coming to market, and there is again evidence of this with an increase of 1.4% in the first week of 2012. This is masked within the overall monthly price fall of 0.8%. In spite of the challenging market, year-on-year asking prices remain virtually unchanged, up by a nominal 0.4%, though with RPI running at 5.2% this represents a fall in real terms.
Shipside explains: “The increased market fragmentation caused by the credit crunch means that success in selling now requires a very careful and complex micro-market analysis, rather than a wishful price-punt to see what happens. There can be hotspots and blackspots by property type within the same geographic location depending on local buyer confidence, demographics and their ability to obtain a mortgage, so doing your research and taking expert advice are critical. There will be upwards price pressure where the local market is short of a type or style of stock. In these areas, getting your property onto the market soon could be to a seller’s advantage given the strong upsurge in property search activity.”
Rightmove forecasts that the market will remain challenging and fragmented during 2012. There are opportunities and threats within local micro-markets for different categories of buyers and sellers. Some of the groups that stand out as potential winners and losers in 2012 are:
Winners in 2012:
– The Mortgage-Ready. Deposit-assisted first-time buyers and equity-blessed trader-uppers will be able to access historically cheap mortgage deals and be sought after and fought over by sellers in areas of property over supply. Shipside comments: “Mortgage-ready first-time buyers have lots of bargaining power. Some will benefit from parental assistance. Others, who wish to buy a new build home, can benefit from a variety of schemes such as FirstBuy and the imminent Government-backed mortgage indemnity guarantee, aimed at assisting them to realise their dream of home ownership. Those who are selling to trade up will have to offer good value on their sale, but should be able to offset any reduction by negotiating hard on their purchase.”
– Savvy Buy-To-Letters. Buy-to-let investors who can identify where tenant demand and rental levels will give good secure returns compared to local capital values are being strongly courted by lenders. Shipside explains: “There are nearly three times more buy-to-let mortgage products available than two years ago. With low yields on most alternative investments, 2012 is potentially a good year for investor landlords to expand their portfolios.”
– The Special Ones. Those selling properties ‘with a difference’ have an opportunity to stand out from the crowd, especially if they operate in a micro-market where there is a shortage of supply of their property type or style. Shipside adds: “With discerning buyers seeking value, estate agents will be competing hard to attract the attention of owners who are selling a property that offers something special.”
– Golden-Oldies. Agents report that in locations of low stock for sale and shortages of fresh stock coming to market, some properties that have been on the market for a long time are now attracting interest. Shipside comments: “New-on-the-block potential buyers will look at everything that is available no matter how long it has been for sale, while due to the lack of choice, more long-standing searchers are re-considering properties that they have previously discarded. Relaunching a stale property by combining a price reduction with refreshing of photographs to show off previously hidden ‘golden features’ of a stale property could do the trick with this upsurge in buyer interest.”
Losers in 2012:
– Trapped Renters. 55% of renters state they wish to buy but cannot afford to, according to Rightmove’s recent Rental Market Report. Shipside comments: “With the upwards pressure on rents, many tenants will be thinking they could pay less on a mortgage if only lenders would relax their deposit criteria.”- The Upwardly Immobile. There are a large number of homeowners who would like to trade upwards, but find themselves immobilised in a property that no longer suits their needs. They are equity-poor and stuck in their existing property, as the size of the deposit that they would need in order to move on or move up is more than they could raise from the sale of their current home. Shipside explains:
“Many would-be first-time sellers will fit into this category. They will be further disadvantaged by the removal of the stamp duty holiday at the beginning of March for their target audience of first-time buyers.”
– The Average Ones. Those selling properties ‘without a difference’. In areas of over-supply, a property that is ordinary must be made extra-ordinary either by reducing its price or by improving its appeal, if that is practically and financially feasible. Shipside comments: “In locations with plenty of choice, sellers that do not or cannot offer a special home or a special deal are likely to be left on the estate agent’s shelf. There is a ‘mass-market mortgage desert’ now parched of funds. They were formerly provided by overseas and UK lenders, raising funds in the wholesale money markets that have now effectively closed down. To stand out as the exceptional property where supply really outstrips demand requires a financial hit that many are not willing or able to take unless they are absolutely forced to.”
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