Have property prices finally started to turn?

This third consecutive monthly increase may be more than a seasonal bounce. It could be argued that one or two months of rises is the result of traditional spring optimism and volatility caused by low volumes, but three months in a row and the biggest rise for more than a year may indicate a price floor has been reached and confidence is starting to return.

More properties are also coming onto the market with 22,000 new sellers per week – up 13% on previous month.

However, many new sellers are still starting too high with around 80,000 lowering asking prices by 2% or more each month.

And any early signs of recovery must be put into the context of mortgage approvals which are currently running at a mere third of recent levels.

Miles Shipside, commercial director of Rightmove said: "My view is that many sellers are still starting too high, but the fact that they are coming to market in greater numbers and feel they can ask more shows a strengthening in resolve and confidence, which is an encouraging sign. It looks like we are now bumping along the bottom of the trough, but for there to be any real sense of optimism that we’re on a sustainable road to recovery, the availability of mortgage finance needs to improve significantly, given that mortgage activity is currently running at around a third of its average levels between 2002 and 2007.

"Thankfully mortgage lenders are finally starting to release more funds to finance new house purchases."

Estate agents report a continuing increase in sales levels beyond the 19% uplift in mortgage approvals reported by the Bank of England for February, indicating that the trend of improving transaction volumes could continue, albeit from a chronically low base.

Feedback from estate agents suggests that prices actually being achieved are still around 25% below peak prices in many instances, though quality homes in desirable locations perform better.

Those parts of the country that have adjusted to the credit famine have found that prices have stabilised at around this level, giving substantial leeway for sales activity to increase if credit restrictions were to be relaxed.

Shipside said: "2009 will not see the triple whammy of recovery of confidence, the economy, and institutional lending. Some sellers are doing deals at prices that have adjusted to the new reality, though there also remain some real property black spots of overpriced supply outstripping recession-dimmed demand. Those less desirable and harder-hit areas will lag well behind in the recovery given the new era of financial prudence, and those that have to sell must be even more realistic."

With repossession numbers still muted due to lower mortgage payments and mortgage lenders’ "Pre-Action Protocol" to keep borrowers in their homes, this shows a genuine return of discretionary sellers deciding the time could be right to do a
deal. As a result, average stock per estate agency branch has risen from 71 to 72.

However, with far fewer agents in business than last year and reduced levels of new build, the overall number of properties available remains at historically low levels, underpinning initial asking prices.

It is possible that both this price support and lower inventory levels are the result of a paradigm shift in potential seller behaviour, due to a significant percentage being deterred by the up-front costs of a Home Information Pack

Shipside said: "With only 38,000 mortgage approvals recorded in February, it will be a real challenge for mortgage lenders, including the Government-owned institutions to satisfy the mortgage needs of both these 111,000 new sellers and those who are already active in the market."

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0 thoughts on “Have property prices finally started to turn?

  1. Kate

    We continually seem to be trying to put the cart before the horse by calling the market bottom before the price falls. Miles Shipside, RM Director, has been saying since January that sellers across the board need to drop their prices 25% from peak (2007). Even in the current RM Index, (based only on newly listed property coming on the market, not all the ones reduced and reduced because they are not selling), Miles Shipside said there is a BIG difference between asking and selling price. If you do a search for the Feb / March RM Index , Miles Shipside said the rise in asking prices was BAD NEWS just prolonging the misery. 2 weeks ago CEBR said that even if mortgage approvals doubled in the next few months (which they thought was highly unlikely) property prices would still fall 35%. If the approvals didn’t double they expected 40% falls. Moodys last week downgraded lenders on the basis that “the assumption now was 40% falls” but they stress tested for 60%. There is nothing, beyond the spin, to suggest that the market has bottomed, other than lenders now also valueing 30% off peak.
    35% falls equals £300000 property valued at £195000 when you see that you will know we are moving towards the bottom .
    I believe lenders offering re mortgage are already knocking off 40% from peak.
    Anyone buying in todays market needs to negotiate themselves 30% from peak and be willing to lose another 20% + in the next few years. Prices are not going up any time soon, once they have bottomed they will then only rise in line with income as they have historically always done.

  2. Andrew Vos

    …however this doesnt stop overpriced proeprty from coming onto the market for various reasons such as
    1) Vendors still reluctant to acknowledge their properties are not worth anywhere near what they expect. Every day we value property and after we have given our valutaion we are told in no uncertain terms “if you want to act for us you will put our property on at a price WE want”
    2) As per point 1..there are many Agents willing to put overpriced porperty on the market because its either the only way they can get instructions, they dont understand the market place or that they are earning from supplying an expensive HIP!
    3) Vendors/Agents are fully aware that whatever the marketing price buyers are still factoring in a reduction so prices are being kept high to allow buyers to still offer!
    The only way to ascertain if prices are on the up or that the crisis is over is to look at what is actually being sold, NOT what is on the market….and thats not a statistic many wish shout about!

  3. chris newman

    kate you talk rubbish. how can you generalise the entire uk property market? some sectors i.e. flats will perform differently to others i.e. houses and regions wil differ too. Lenders “already knocking off 40% from peak” = absolute rubbish. “prices will only rise in line with income as they have historcally always done” = absolute rubbish too – have you not had your eyes open during the last 10 years?! Nutter