Unsurprisingly, the majority of prospective spring sellers are being deterred by the conditions attached to doing a deal in the current market.
There is evidence of buyer appetite at around 25% below peak prices and this level of discount is likely to be a major
factor preventing many aspiring sellers from coming to market.
In addition, those sellers who have marketed in the last four weeks are showing resistance to the new reality by starting at prices £1918 (0.9%) higher than the previous month. This small increase in asking prices may also reflect estate agents having to compete for the limited numbers of good quality homes coming to the market.
To win new instructions, agents are agreeing to vendors’ demands and marketing properties at what seem like unrealistically high prices for a short period of time. They then have to persuade vendors to reduce the price to the point at which buyer interest is going to be found. This not only wastes the valuable early period of marketing, but is also likely to lead to a lower eventual price, as buyers scent a price reduction and offer even less.
Disappointingly too, the minority of buyers and sellers who are adjusting to the new market reality are finding that mortgage funding from the banking sector remains scarce, decreasing the odds of a speedier market recovery.
Miles Shipside, commercial director at Rightmove said: "Some sellers are still pricing wishfully high, though it is encouraging that elements of the market have adapted relatively quickly to find a new price floor at a discount of around 25% from peak. We are seeing a big jump in inquires, looking for those best buys. However, it is disappointingly predictable that the banking sector is still in the early stages of coming clean about its levels of toxic debt, limiting funding for one of the few bright spots of consumer demand in the economy.
"Until banks get their own houses in order, the active minority of sellers and agents who have drastically adjusted pricing will remain frustrated by the limited functioning of the financial services sector."
This is the lowest number of new sellers Rightmove has measured in a March market since 2003. Concerns over extending their exposure to credit in the face of growing unemployment, as well as its limited availability, are likely inhibitors to this year’s traditional spring trading-up season. An additional burden for sellers will occur from April 6, when they will have to wait several days for a completed HIP to arrive in the agent’s office, rather than be able to market immediately.
Sellers must also overcome a psychological barrier when accepting a paper loss from what a property’s value might have
been, though for some more recent buyers the paper loss becomes very tangible when negative equity prevents them trading at this new price floor. Those who are serious about selling should be encouraged by a fall in average time on the market, down from 91 days to 82 days. Average unsold stock per estate agency branch has also fallen slightly from 72 to 71, in spite of surviving agents sharing the inventory of the thousands of branches that have closed.
The combination of limited supply of new sellers and the falling stock on agents’ registers results in those remaining on the market having the opportunity of selling quicker if they are well priced, well presented and well promoted.
Shipside said: "Rightmove advised sellers in March last year to ‘get smart’ and price sensibly rather than chase prices down in a deteriorating market. Those that acted smartly may well have sold at half the discount that those who over-priced are now facing. Pricing to sell and presenting well are still just as important one year on, with Rightmove showing a
return of buyer activity when you get it right. Odds of selling would be much further improved however if current mortgage approval volumes were allowed to rise above 40,000 a month, around one-third of traditional levels. Without this stimulus we are destined to ‘bump along the bottom’ in both transaction volumes and the prices at which deals are struck. One characteristic of this will be a period of fluctuation between price rises and price falls as lower activity increases the level of volatility."
A stimulus to lending could help boost the market and sentiment prior to potential forced sellers entering the market, preventing speculation of further downward pressure on prices.
With building societies fighting a losing battle for savers’ funds due to falling base rates, it falls upon banks and the Government to engineer improved mortgage availability to satisfy demand for responsible lending. Pent-up interest in property is again evidenced by inquiries on Rightmove being up by 120% compared to the same period last year.
Agents also report fewer sales falling through, with increased competition for the best buys as well as buyers now feeling more confident they are buying close to the bottom of the market. Interest from investors has also picked up markedly. In spite of rents being under pressure from increased supply, yields are looking increasingly attractive compared to the returns available on other asset classes.
Shipside said: "Against the backdrop of the worst housing market for 50 years, buyers and sellers can be successfully brought together. Some buyers, sellers and those in the property industry have adapted relatively quickly. Estate agents have shed thousands of staff, cut out non-essential expenditure and expanded into lettings. Cut-throat competition to put more deals together will force more innovative approaches within the industry, and it is a shame this is not being matched by the mortgage providers."
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