Prices to rise 8% in 2014 unless new stock comes to market - Rightmove

Rightmove has predicted that house prices will rise 8% in the next year - unless more properties come to the market.

Related topics:  Mortgages
Amy Loddington
16th December 2013
Mortgages

In their latest release, they have noted that transaction levels in England and Wales are up 13% so far in 2013[1] compared to 2012. With the release of some pent-up demand, Rightmove forecasts a rise in average new seller asking prices of between 6% and 8% in 2014. Whether the lower or upper range emerges depends on the supply of sellers who come to market in spring next year. With new listings in 2013 up just 2% on 2012, there is a time-lag between transaction growth and new listing growth leading to a further squeeze on property supply.

Miles Shipside, Rightmove director and housing market analyst comments:

“There’s a listing gap to fill. While sales transactions are up 13% so far in 2013, the number of newly listed properties is only up by 2%. To help mitigate the upwards pressure on prices it is important that home-owners who have a move on their minds make it a new year’s resolution to spring into action. After six years afflicted by the credit-crunch, there’s a definite window to move up or move on in 2014 before the market’s usual pre-election pause in early 2015. A good and plentiful choice of property for sale would limit sellers from getting over-ambitious with their asking prices and result in a national average increase closer to 6%. It would also give those who are buying a better chance of finding their dream home at a more affordable price.”

Rightmove expects the price movements and drivers of activity in 2014 to be highly localised, with some towns and cities within regions generating momentum at a faster rate than others. This has already been seen, they in 2013 within the more prosperous southern markets with examples such as Bath, Bristol, Cambridge and Oxford all pushing up regional averages. Cities like Leeds, Manchester and York are expected to be similar northern hotspots during 2014, though even within these cities, suburbs will increase at different rates. Further south, London could rise by another 6% and the South East by up to 10% due to the London ripple effect.

Shipside observes:

“As the momentum of recovery increases, areas with the largest shortages of fresh property supply are likely to see more substantial price rises, with the South East among the regions where listings are most scarce. The strength of the market recovery will remain patchy however, with average incomes, employment and regeneration levels having a major say both north and south. Overall, agents in even the more depressed parts of the UK say they can see light at the end of the tunnel, though they also observe that there is a lot of stale stock in these slower moving areas to be cleared before prices can rise.”

Mark Carney, Governor of the Bank of England, recently referred to the ‘lifting of uncertainty’ as a key driver in unlocking pent-up demand in the economy. Rightmove’s latest survey of more than 40,000 potential home-movers shows a greater degree of certainty in the housing market specifically. Four in five (79%) home-movers predict higher prices by the end of 2014, the highest proportion recorded in the five years that Rightmove has run the survey. As well as the motivation to move, buyers also need the means.  With the thawing of credit conditions resulting in the highest lending levels since 2008, this piece of the recovery puzzle also seems to be in place. As lending restrictions continue to ease, Rightmove forecasts transactions to increase by around 10% in 2014 taking the total number to around one million, the highest since 2006 and up from an estimated 900,000 in 2013 (England and Wales only).


Ongoing efforts to build confidence among lenders to lend more, so stimulating greater competition in the higher loan-to-value mortgage market, is essential in delivering a sustainable bottom-up market. It is also essential that lending is responsible, and with lenders implementing the Mortgage Market Review recommendations in preparation for the April 2014 deadline, lending beyond a new borrower’s ability to repay is much less likely. These rigorous standards also apply to mortgage applications under phase two of Help to Buy, the government-backed mortgage guarantee scheme for existing homes.

Shipside notes:

“Consumer confidence is essential to a healthy market. Transactions only increase if people are motivated to make the financial commitment to buy and trade up. More will do so if they believe prices are on the way up rather than down, leading us to expect transaction volumes to hit the one million milestone in 2014. Stable, competitive interest rates and easier access to the mortgage market are among the reasons people cite for their growing confidence. With Help to Buy encouraging more lenders to offer mortgages to those with 5% deposit, the scheme appears to have had a successful start in creating the framework for a return to a normal, functioning higher loan-to-value mortgage market. Agents report low take-up of phase two of Help to Buy in London and the South East as mortgage repayments for many properties are not affordable for buyers with only a 5% deposit. Take-up appears to be greater the further north you go, so it seems to be helping those it was targeted at and those expecting a Help to Buy London bubble have got it very wrong.”

There is more upwards price pressure in the pipeline as average stock per estate agency branch fell from 68 to 63 properties in the last month. It makes sense for first-time buyers to act early before prices rise, and those looking to trade up should also consider a move as soon as possible before the trading-up price gap widens further.

Shipside advises:

“With Rightmove experiencing a 21% year-on-year increase in traffic, there is a definite sign of more people sizing up a move. Early spring marketing is the best option for trader-uppers as upwards price pressure could build if stock for sale continues to dwindle. The jump to the next rung of the property ladder could get wider, especially if those who do not have anything to sell can afford to jump in ahead of you. With mortgages still historically cheap and interest rates set to remain stable, if you’ve been putting off a good reason to up-sticks, it could be opportune to make 2014 the year to move.”

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