In part this is fuelled by the cash-rich sectors of the market where buyer demand is exceeding suitable property supply, though there is also evidence of increasing housing market confidence. After four years of constant economic uncertainty, it seems some property consumers have accepted current market conditions as the new norm.
Miles Shipside, director at Rightmove comments: “We’re seeing a strong ‘spring bounce’ in asking prices this year, but the ball is still a lot smaller than it was before the credit crunch as market volumes are constrained. The biggest jump in new sellers’ asking prices for nearly ten years indicates there is pricing power if you are selling the right type of property in the right place where enough potential buyers have access to funding. If your local market does not have those characteristics and your price-pump is based on little more than seasonal optimism and an estate agent’s hot air, then be prepared for buyer response to be a let-down.
However, there are also indications that those who are able to buy but had previously lacked the confidence to take the plunge are of a more positive mindset this year. Perhaps some people are adjusting to the realities, opportunities and strange normality of a low volume but apparently stable property market”.
Properties coming to market in the early months of the year are often the beneficiaries of a ‘spring bounce’ in asking prices, particularly during the years between 2000 and the onset of the credit crunch. For example, monthly rises of 4.5% were recorded in both February and April of 2002. Since then the largest percentage monthly uplift has been the 3.6% of April 2007. If a more bullish asking price is accompanied by a strong and market-wide seasonal increase in buyer activity, and finance is available to support it, then the local market accepts the increase. This was the pre-credit-crunch norm, but the current UK housing market is now characterised by a number of highly localised micro-markets performing very differently. Potential homemovers’ confidence and ability to move in these micro-markets are affected by a number of factors including access to finance, employment dynamics and mix and availability of housing stock. Upwards price-pressure is understandable in active cash-rich micro-markets with a new listings shortage where demand exceeds
supply, though there are also some early signs of more widespread increases in consumer confidence in the housing market.
Compared to a year ago there is more competition from lenders to attract a greater volume of quality business. The number of available products for both borrowers with a 10% deposit and buy-to-let investors has risen by 35% and 25% respectively over the last 12 months1. There are some attractive five and ten year fixed-rate deals too.
While the £250,000 band stamp duty holiday for first-time buyers ends on 24th March, incentives for buyers of new build properties (which are not included in the Rightmove House Price Index) are set to be enhanced with the launch of NewBuy. This is an industry-led initiative supported by Government to increase the availability of higher loan-to-value mortgages for those buying a brand new me.
Shipside observes: “Since the credit crunch you’ve had to be squeaky clean to pass a credit score, but lenders have more product offerings and are advertising their availability far more strongly in the media. If your mindset is that lenders do not want to lend, then you may not want to bother sourcing finance and face potential rejection. Some agents report that this recent higher product profile from lenders has given some previously disenfranchised buyers new hope”.
60% of the 32,000 questioned in a recent Rightmove survey stated they feel the current housing market favours buyers, a clear indication that there is buyer bidding- power in their area to get a lower offer accepted. The same survey also found that just over half (51%) viewed property as lower risk when compared to other investment options, providing further evidence of confidence in property as an asset class.
Shipside explains: “Prices of some property types in some areas have dropped back enough to offer temptingly affordable homes, either to investor landlords looking for good rental yields or to buyers comparing mortgage payments to the costs of renting. In some micro-markets sellers have the upper hand, but on the whole a buyer with cash or a mortgage offer is the one in the driving seat”.
Record January search activity on Rightmove indicates a pent-up desire to move that out-weighs the uncertain economic outlook. With sales transaction numbers having been depressed for the last four years, many households will have a pressing need to move, and some of those that are able to do so seem to be springing back to life.
Shipside comments: “Search activity on Rightmove is up by 19% on January 2011, and it could be a sign that some of those who can afford to move have decided to get on with their lives, driven either by desperation or by coming to terms with the constant barrage of negative economic news being the new norm. You can get tired of gloomy news, or get used to it, and indeed for some cash-rich buyers life has moved on to such an extent that it’s like the Lehman Brothers collapse never happened”.
Some agents report that sales achieved in the last quarter of 2011 have now left them short of saleable stock. In October last year average unsold stock per estate agency branch was 75 properties, and this has now fallen to 67. This is further evidence of a pick-up in buyer confidence and demand starting to eat away at the rump of unsold stock. Lack of capacity in the new-build sector and sellers’ reticence to come to market also means that properties that are coming off the market are not being replaced at the same rate.
Average weekly listings are currently running at circa 30% below pre-credit crunch levels, and new seller numbers continue to be as depressed as those of 2011. The weekly run-rate of 24,406 new listings is virtually unchanged on the 24,327 recorded in the same period last year. Upwards price-pressure is likely to be sustainable in active cash-rich micro-markets with a shortage of new listings. For example, London asking prices are now less than 1% off their all-time high, with property coming to market down 9% on this time last year.
Shipside adds: “When prospective home-movers see less property advertised for sale and those that are turning over more quickly, it has a positive effect on their confidence to move and encourages them to act with more urgency. Stock levels are still on the high side in some less active parts of the country, but much of that stock is perhaps over-priced and un-saleable. However, in some micro-markets the shortage of existing and new instructions is such that it has helped contribute to the largest monthly jump in new seller asking prices for nearly a decade. While the mass-market stays at home, those that have access to funding continue to be active and have spending power, resulting in this month’s big price hike”.
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