The average asking price of property coming to the market remains virtually unchanged at £243,759, up just £22 (+0%) on the previous month last month.
This indicates that the market is losing its traditional spring momentum earlier than usual this year, with the expiry of the first-time buyer stamp duty exemption a significant driver.
Overall market volumes look set to remain subdued in 2012 as the motivation of new sellers to come to market has stalled too, with new listing numbers down by nearly 10% in May compared to April.
Rightmove said it is a cause for concern that the market appears to have lost its spring momentum as there is likely to be a longer than normal summer slowdown thanks to the extra distractions of the Jubilee and Olympics.
New research from Rightmove also shows that those wanting to trade up are outnumbered by those looking to trade down.
This market mismatch has its roots in age demographics and the baby boomer generation’s changing housing needs.
Miles Shipside, director of Rightmove, said: “New sellers asking more in May had become the norm, so it comes as quite a shock to see prices flat at this time of year.
“Perhaps the first-time buyer stamp duty holiday and the knock-on activity it helped to create has concertinaed the market’s stronger than expected early spring momentum into the first four months of the year rather than the usual six.
“The high rainfall in May will have been a further factor in dampening prospective buyers’ enthusiasm to get out and view property, and even if the forecast picks up we have a summer of sport and celebration ahead that will provide further distractions.”
The end of the first-time buyer stamp duty exemption appears to have been a factor in the market losing its price momentum, having contributed to a brisker than expected start to the year.
Recently reported statistics for March show that first-time buyer mortgages constituted over 40% of all advances, fleetingly back to levels normally associated with a healthy and balanced housing market.
The knock-on effect is for some of those who sold to first-time buyers to then trade up, and again the mortgage statistics indicate a 15% increase in mortgage lending to the rest of the market compared to March 2011.
Shipside said: “The post-stamp duty holiday lull in first-time buyers and the upward chains they help to build appears to have made the market pause for breath, taking the wind out of spring market sales a little earlier than usual.
“It’s hard enough for those looking to get onto the property ladder to save the chunky deposit, and now some face the prospect of another savings spurt to pay stamp duty.
“This will put some first-time buyers on the sidelines for a few months and rule some out of the game for much longer, before they can field themselves again as ready, willing and able to proceed.”
The number of new sellers appears to be stalling too, with the weekly run-rate of 26,595 properties coming to market in May nearly 10% fewer than the 29,333 in April.
All 10 regions saw fewer fresh property listings compared to the previous month, at a time of year when enthusiasm to try and sell should be higher.
This will help underpin prices in areas with a shortage of supply and keep market conditions more buoyant in various micro-market hotspots around the country.
In less active areas seller numbers are restricted as many have insufficient equity to either afford the jump up to the next rung on the property ladder or obtain the best mortgage rates.
Agents report that some of the recent upward creep in lenders’ interest rates has had a detrimental effect on activity.
Rightmove said some sellers may also have concerns about realising what they perceive as ‘fair value’ for their current property from those buyers who are able to proceed.
The shortage of property for sale to tempt them in their target market can also cause them to rethink their moving plans.
Shipside added: “The ability to trade up is a vital component of a healthy housing market, though there is concerning evidence that the numbers who want or are able to trade up are worryingly fewer than those who intend to trade down.
“This imbalance is exacerbated by baby boomer downsizers perhaps looking to release some of the considerable equity that their generation have benefitted from.
“With trader-uppers restricted by insufficient equity and a lack of mortgage funding there are currently too few buyers to fill the gaps at the lower end of market, stoking the growing imbalance between downtraders and uptraders.”
Research by Rightmove reveals that two in five of those who intend to sell over the next 12 months are motivated by a desire to ‘trade down’.
This group includes the traditional three Ds – Death, Debt and Divorce – but also features retirement, equity release and smaller property needs.
This compares to only one in four who are looking to ‘trade up’, with growing family, space and school requirements.
Trading down was the main motivation for moving in nine of the ten regions of the UK.
Only in London does trading up come top of sellers’ requirements, providing further evidence of the two-speed housing market in the UK.
London is generally more affluent and has a higher concentration of equity-rich homeowners with the means to move.
Across the rest of the UK there is a greater level of activity from those looking to trade down.
As well as being a reflection of the current mortgage squeeze preventing more people from trading up, age demographics are also a major and growing factor, which will exacerbate the mismatch and lead to further market deadlock.
The baby boomer generation, who have been considerable beneficiaries of housing equity growth, are now of an age where they are contemplating trading down.
The number and financial ability of trader-uppers to balance the numbers of those who now wish and are able to trade down appears to be out of kilter.
Shipside observes: “We have an ageing population, with more old people at the top of the chain trying to downsize and fewer at the bottom trying or able to trade up.
“Some people may be facing redundancy and looking to reduce their outgoings, and others may be looking to supplement their underperforming pension pots.
“The borrowing difficulties now facing traditional trader-uppers is making the mismatch greater, while downsizers face fewer issues as they are looking to release capital rather than borrow more.”
Perhaps of more immediate concern to the market, however, is the re-emergence of Eurozone issues that potentially threaten economic stability, mortgage market liquidity and housing market sentiment.
Shipside said: “If Greece defaults then the knock-on effects could be a further reduction in mortgage availability and weakening consumer sentiment causing even more potential buyers to sit on their hands.
“With overall market volumes already in the doldrums, we need a fair and consistent wind of mortgage lending to prompt a speedier housing market recovery.
“Ironically, London property could become an even more popular safe harbour for foreign cash in stormy times, further widening the gulf between the capital and the rest of the country.”
