However, the rise should not be overstated—if prices had kept pace with inflation (as measured by the RPI) since May 2008 then they would now stand at £270,459, so they have fallen by 9.9% in real terms. In addition, the national average asking price is buoyed by London’s strong performance. While new sellers nationally are asking 0.5% more than the last record set in May 2008, those in London have found sufficient confidence to raise their asking prices by 14.9%. This has acted like a crutch to support the national average and enable it to surpass the levels achieved prior to the onset of the worldwide interbank lending crisis. Removing the capital from the dataset demonstrates the extent of the ‘London effect’ and reveals that average asking prices in the rest of the country have actually fallen by 4.3% since May 2008.
Miles Shipside, director of Rightmove comments: “From a national perspective, it has taken four years for new sellers to pitch their asking prices above their previous record. However, this is not a universal signal of a housing market recovery. The richest seams of housing market activity are concentrated around those with access to cash and finance, with a strong bias to the south and London in particular. Even within regions there are micro-market hotspots where demand from those that can buy and the confidence and momentum it engenders are helping to push asking prices to new record highs. It’s a somewhat perverse state of affairs for many of the mass-market not deemed as mortgage-worthy by the lenders that, at a time when many aspiring buyers are excluded, the national average price of property coming to the market is at an all-time high”.
The rise in new seller asking prices of 2.9% (£6,798) this month is the highest recorded in the month of April since 2007, five months before the run on Northern Rock. Those that can raise a substantial deposit enjoy historically low interest rates fuelling rising prices in the markets they operate in. The generally more affluent southern regions have all seen more bullish upwards price pressure in the last 12 months compared to the northern half of the country. London leads the way with an annual increase of 7.9%, followed by East Anglia at 6.2%, the South West 3.9% and 3% in the South East. The generally more credit-starved northern regions have all recorded lower annual increases (East and West Midlands, Wales and North) or falls in the case of Yorkshire and Humberside (-0.2%) and the North West (-1.2%).
Both London and the South West have recorded new price peaks this month, surpassing previous records by 2.1% and 2.3% respectively. Also highlighting the better price performance of the south, the two other southern regions of the South East and East Anglia are just £810 (-0.3%) and £2,489 (-1.1%) off their previous peak prices. In contrast, the price peaks in all of the northerly regions (see table 1) were set during 2007, prior to the withdrawal of Northern Rock as a mass-market lender. Current new seller average asking prices in Wales are the furthest adrift, 12.3% (£23,171) down on their previous peak set in August 2007. The regions of Yorkshire and Humberside and both East and West Midlands are also over 10% below their 2007 record highs, with the North region being the closest to its July 2007 peak, but still nearly £10,000 (-5.8%) shy.
Shipside comments: “This is a reflection of the new world where house prices in micro-markets are driven as much by banks’ willingness to lend as by consumers’ desire to buy, making buying aspirations more achievable in the relatively credit-worthy south, and London in particular. Those deciding to sell in the south are looking a lot more confident in their pricing power than their more nervy northern counter-parts. While there are still micro-market hotspots in the north, there are more negative elements to add in to their moving equation, such as employment prospects and lack of equity. Such factors can undermine, or scupper, prospective buyers’ ability and confidence to buy at inflated prices. More potential buyers in the south have the virtuous circle benefits of less economic stress, greater access to equity making them more appealing to lenders, and consequently more confidence to pay higher prices.”
While new sellers in the south are leading the way in terms of price recovery compared to previous peaks, transaction volumes still remain well below pre-credit crunch norms. Nationally, 30% fewer properties were brought to market this month compared to April 2007, and 0.5% fewer than April last year. The South West region, where the average price of properties coming to market has also hit a new high, has the largest year-on-year fall in new property listings, with the number of properties coming to market down 5.5% on April last year. London, the other region to record a new high this month, has actually seen lower fresh property supply compared to the previous month, down by 5%. This is an unusual event as the spring moving season should be gathering pace, with more sellers coming to market not less. The net effect is another new asking price record for the capital. Where prices have risen substantially this has helped those who wish to trade up to benefit from additional equity to shake off their ‘credit-crunch blues’ imposed by the harsh deposit requirements of lenders. The downside is that would be “trader-uppers” in popular locations are currently faced with less fresh choice to tempt them to come to market themselves.
Shipside observes: “Fresh property stock is a bit scarcer this April compared to last, and this is a key factor in providing a price floor for spring prices to springboard from. This is the strongest price-bounce Rightmove has ever recorded for the first four months of the year. New sellers are setting asking price records in the fresh-stockstarved London and South West regions, and agents report this is also the case in micro-markets in other regions where a shortage of fresh stock is coinciding with the traditionally more active spring market. However, local market conditions vary considerably. So, while the overall prospects of a seller achieving a record price are higher in London and the South West, doing your research on your own local micro-market is essential to gauge what type of property is in demand, how quickly it is selling and how close to the asking price is being achieved. Buyers scour the market looking for the best value, and can easily spot properties that are out of line. The tightening of the stamp duty noose will cause some price machinations, especially for the higher priced thresholds where the tax-take really starts to bite”.
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