With this is mind the decisions of new sellers to increase asking prices by an average of 1.7% (£4,031) this month look to be over-optimistic. This is a clear indication that the number of properties available to buy is not being matched by the number of buyers able to proceed.
Miles Shipside, director of Rightmove, comments:
“With buyers still struggling to raise the necessary finance, the net result has been the biggest jump in unsold stock on agents’ books that we have recorded in nearly four years. While stock levels normally increase during the first half of the year, this is a larger increase than normal.
"With government cuts starting to bite and interest rate rises still expected in the second half of the year, those who are serious about selling should look to price more keenly in the spring selling season”.
This month, a weekly average of 28,390 properties came to market, an increase of 9% on April 2010 and up 28% on April 2009. With the latest Bank of England mortgage approval figures showing no year-on-year growth (February 2011: 40,302 / February 2010: 40,582 – non-seasonally adjusted), buyers’ inability to soak up this increased supply has resulted in the large increase in unsold stock per estate agency branch. In May 2007 when we last saw an increase in stock levels of this magnitude its impact was lower as mortgage financing was freely available and market conditions were more buoyant.
It is against this backdrop of a substantial increase in available property supply that new sellers have pushed up their average asking prices to 1.7% higher than those recorded a month ago. This is the fourth consecutive monthly increase.
With national average asking prices now 6% (£13,412) higher in the four months since the start of the year, sellers and estate agents should take serious note of the growing imbalance between seller supply and the seemingly static number of buyers who are ready, willing and able to proceed. While local markets may vary, the marked growth in supply is a clear indicator that fresh sellers should on average be asking less for their properties rather than more.
Shipside observes:
“On a positive note, the fact that many new sellers feel they have the confidence to test the market at substantially higher prices shows that the Damoclean sword of cut-throat competition from distressed sales has yet to fall on sellers’ initial price expectations. This gives serious sellers and in-tune estate agents the opportunity to price below their less realistic competitors and stand out as offering better value to deposit-strapped buyers.
"The negative consequences for the market are a longer period of adjustment in buyer affordability and lower sales transaction volumes”. Property prices are falling in real terms, with Rightmove recording static prices year-on-year (+0.1%) while the latest RPI figure shows inflation at 5.3%. However, with average annual wage rises failing to keep pace (+2.0%) and lenders’ high deposit requirements pulling the housing ladder up and out of reach for many would-be buyers, a recovery in volumes due to improved buyer affordability is not a near-term prospect.
"Indeed, the likelihood of one or two base rate rises in the second half of 2011, despite this month’s surprise fall in the rate of inflation, will be a moderating factor that will hit potential buyers both psychologically and in their pockets, as well as pushing more sellers into the ‘must sell’ camp. Given this outlook, serious sellers have a window of opportunity this spring before what could be more challenging conditions ahead."
Shipside says:
“Our statistics and analyses indicate that the tough selling environment that the less wealthy areas are currently experiencing is likely to deteriorate further in the latter part of 2011. In these areas the spring moving season offers the best opportunity for sellers to achieve success if they embrace ‘serious sales’ tactics”.
London asking prices hit all-time high
London’s spring sellers have felt sufficiently confident to market their properties at an average of £431,013, a new asking price record.
Miles Shipside, director of Rightmove comments:
“Estate agents are reporting buoyant market conditions and sales activity in the capital resulting in a shortage of property for sale in popular areas. While the rest of the country struggles to sell or raise deposits to buy, demand from cash-rich buyers in London has meant that sellers can ask record prices.
"However, this is not like the most recent boom where easy credit and record bonus pay-outs led to large increases in asking prices every month. This time it’s crept up on the market, with prices fluctuating month-to-month but overall driven by an ongoing shortage of property being outstripped by consistent demand”.
The buoyant market conditions have encouraged more sellers onto the market, though the increases in fresh stock numbers have still failed to satisfy demand. New seller numbers are up 15% on April last year, up from an average of 4,208 per week to 4,836. There is a more dramatic recovery against the muted 2009 figure, with 59% more Londoners choosing to market their properties this April compared to two years ago.
The strength of demand has meant that only 3 boroughs out of 32 have recorded monthly asking price falls, with Westminster, Islington and Hillingdon showing marginal reverses.
Shipside comments:
"While we often see monthly fluctuations, the theme this month is for sellers to be asking more in the vast majority of boroughs. There is a conti
