The average new seller asking price is now £294,542. Likely influences are the onset of the seasonal summer slowdown, and buyers’ constraints in affording record prices.
The latter underlines the need for more new build homes and emphasises the importance of the recent government announcement on speeding up residential planning permissions aimed at boosting supply.
The shortage is most acute for smaller homes with two bedrooms or fewer, where Rightmove sees the biggest demand in excess of supply.
Miles Shipside, Rightmove director and housing market analyst, commented:
“Another month, and another record high in the price of property coming to market. While the monthly increase is very modest, the same period a year ago saw a monthly fall of 0.6% which is more the norm given the onset of the summer holiday season. However, given the widely acknowledged supply crisis and a sharp drop in new seller numbers this month compared to this time last year, it is somewhat surprising that the rate of increase has slowed to such an extent. Recent government announcements including relaxing residential planning requirements on brownfield land are an important part of the mix in improving affordability if they follow through to cheaper land prices.”
The analysis at a national level on Rightmove in June shows that the greatest gap between buyer enquiries and the number of properties available is for homes with fewer bedrooms. While different supply/demand dynamics will be at play in different parts of the country, the overall picture is that properties with two or fewer bedrooms have the highest number of enquiries per property. This large mismatch is in the typical first-time buyer sector (two bedrooms or fewer), with 24% more enquiries per property of this type than for larger properties with three or more bedrooms. They benefit from demand from not only first-time buyers, but also downsizers and buy-to-let investors.
Shipside added:
“The greatest mismatch between demand and supply is at the lower end of the property ladder, as no doubt many buyers in this category would like to afford to buy a larger home, but have had to accept that it is out of their reach and downsize their aspirations to increase their chances of a successful purchase. The forthcoming extra tax burdens on buy-to-let investors may help to tip the balance in favour of first-time buyers, but the consequent drop in rental property supply could push up rents.
“More supply of affordable starter homes for the growing demand from both renters and buyers is required, which means more new build for both sectors to meet the country’s current and future housing needs. The challenge for government, planners and developers is how best to ensure the right properties are built in the right locations and at more affordable prices. This will however depend on addressing capacity constraints in the building industry, the price of land for housing, the consistency of funding for key players in the construction sector and the overall stability of the housing market and the wider economy.
“Creating an environment where homes are more affordable requires long-term solutions. As prices increase, more and more buyers are reaching the upper limits of what they can afford or are allowed to borrow under newly restrictive mortgage lending criteria. Those assessing whether to sell and trade up are faced with a double whammy of curbs on their borrowing power and bigger price jumps to the next rung of the ladder. Improving affordability requires the creation of more homes of the right type and in the right place, resulting in increased churn and more pricing competition. The challenge is to identify what is in demand and in short supply and build more of it.”
Ben Thompson, Managing Director, estateagent4me.co.uk, commented:
“We have seen house prices start to rise over the past few months as confidence returns to the market and these figures are no exception. What these statistics also show very clearly is how varied the regional situation is, with properties in the north west rising by x2.7% over the past year compared to 5.8% in the south east.
"This mirrors our latest Estate Agent Performance index which showed that properties in Reading have an average price of £289,475 compared to Liverpool, where it’s only £115,000. Having this disparity between areas is not good for the market as it will mean buyers are priced out in some regions. The announcement from the Government last week that it is strengthening planning laws is welcome, as it is vital that we work together to ensure there is an increase in housing supply across the UK. More houses will provide a balance against demand and mean prices don’t rise faster than inflation.”
Jeremy Duncombe, Director, Legal & General Mortgage Club, added:
“First-time buyers are taking the brunt of the consequences of the lack of housebuilding, according to today’s data. Younger people looking to get a foot on the ladder are facing fierce competition and this, along with the lack of supply, is driving up prices at a faster rate when compared to larger properties. This is likely to create longer rent tenures for younger generations, who may now need to postpone their dream of homeownership until later in life.
Helping hand measures such as the help-to-buy ISA are welcome, but are likely to stimulate demand. Given that housebuilding is already well below where it needs to be, generating more demand in an already crowded market is likely to be counter-productive unless more homes are built to accommodate those looking to buy. The Government needs to build around 250,000 more houses in order to keep up with the current level of demand, and it’s vital that they follow through with this so that a strong pipeline of new homes is in production for those who want to own their own home.”
