However, it expects first half gains of 8.1% (£17,984) to ebb away, with asking prices likely to fall by up to 7% in second half of 2011, strengthening buyers’ bargaining power.
Nevertheless, despite the expected price falls, Rightmove is now forecasting price gains for 2011 as a whole, surpassing 2010’s virtual standstill, as mortgage arrears and repossession levels fall and mortgage options improve.
Commenting, Miles Shipside, director of Rightmove, said: “2011 looks like a case of déjà vu, with the tide of housing needs yet again failing to breach the levée of restricted mortgage funding. As the seasonal surge in demand begins to fall back, new sellers’ asking prices will also have to ebb away. With mortgage approvals stuck at half the normal level, the number of sellers who can find a buyer is likely to be reduced by a similar proportion. Sellers will need to paddle hard to catch a buyer with funding, or they will find themselves well and truly grounded and unable to move home.”
The average asking price for a property coming to market in June was £240,394, the highest figure Rightmove has ever recorded in the month of June.
However, Rightmove expects there to be some modest downwards price pressure in the second half of this year, as average unsold stock levels per estate agency branch are continuing to rise in spite of the number of properties coming to market remaining subdued.
Unsold stock per branch was an average of 69 at the beginning of the year and has risen every month since, with each estate agency branch now parading an average of 78 properties. This increase in stock levels gives more bargaining power to potential buyers, who remain active as demonstrated by record search activity on Rightmove in May, up 4% on the previous record of January this year.
Shipside said: “Increasing stock levels are a clear indication of buyer appetite failing to keep pace with the number of sellers who are showing some hunger to sell. However, with most sellers able to take their time and wait for an offer that matches their expectations, we are seeing the highest ever asking prices for the month of June.
“High levels of unsold stock and record asking prices cannot remain happy bedfellows for long, so we expect to see this romp away from reality to reverse itself in the second half of the year as the over-supply of property and under-supply of mortgages reassert themselves and exert downwards price pressure. This could be good news for buyers who have been sitting on the sidelines.”
The number of buyers able to proceed is limited by the availability of mortgage finance and the conditions attached to its release. The Bank of England mortgage approval figures for April were the lowest recorded in the year to date, at 45,166 (seasonally adjusted). However, there are signs of some slight easing of lending criteria, with estate agents reporting more loans being advertised for a 5% deposit, although only for the most creditworthy borrowers. Lenders will be encouraged to be in a more positive frame of mind should arrears continue to improve.
With interest rates expected to stay at or close to record lows for the remainder of this year, and recent positive news on unemployment numbers, Rightmove believes the number of forced sellers looks likely to remain subdued which in turn will help to underpin prices. It anticipates that the second half of 2011 will be more positive than in 2010.
It has revised its December 2010 forecast of falls in the range of 2% to 5% and now predicts an increase for 2011 of up to 2% in national average asking prices. As always, local conditions vary, with wildly different activity levels and price changes.
Shipside concluded: “The ‘wealth gap’ between the south and the north is widening, which shows itself in rising prices in the south this month, with prices going backwards in the north. However, wealthier locations in the north are definitely bucking this trend with brisk activity, and poorer areas in the south are struggling just as much as similar areas in the north. Earning power and the ability to raise a decent deposit are the deciding factors, rather than your location on a map.”
