Over the last year asking prices have now fallen by 9.1% against a decline of 7.3% for the year to January.
Key facts the the survey
· 9 out of 10 home movers say ‘bad time to sell’, yet falsely optimistic New Year sellers still follow seasonal trend and raise asking prices by 1.2%
· Continuing lack of fresh stock puts upward pressure on initial asking prices as estate agents bid for spring listings – agents competed for 75,140 new sellers compared to 137,442 last February
· Year-on-year fall highest ever measured as record number of enquiries track prices falling towards perceived affordability zones
· Shrinking number of lenders cherry picking the most credit worthy borrowers, whilst arguing amongst themselves as to who is to blame for this crisis, as opposed to solving it
Overview
A year ago, new sellers coming to the market could be forgiven for not foreseeing the strength of the downturn in market conditions and raising initial asking prices by a massive 3.2%. It could, therefore, be said that the New Year sellers of 2009, with customary spring optimism and time on their side, have shown considerable restraint by raising them a mere 1.2%. However, launching their properties onto the market at an average of £2,593 higher than the month before flies in the face of consumer sentiment. In the recent Rightmove Consumer Survey, 9 out of 10 potential homemovers clearly stated it was ‘a bad time to sell’. It also temporarily defies the expectation that prices have further to fall, though our analysis of this month’s other key statistics puts this rise into context and give further insights into the likely course of the housing market in 2009.
Miles Shipside, commercial director of Rightmove comments: “In spite of 25,000 out of 28,000 potential homemovers in the Rightmove Survey stating it was a bad time to sell, sellers appear to have ignored their fellow homemovers’ assessment of market conditions and put prices up. While sellers have been more conservative in their New Year bullishness than last year, they may regret not pricing more aggressively to capitalise on the spring surge in buyer interest. Sales are being achieved at around 25% below peak prices, yet new sellers coming to market are starting out asking an average of only 10% less.
Serious sellers need to set their initial asking price more realistically to get one up on the competition and take advantage of increasing numbers of bargain-hunters who have set their own price floor ahead of the return of mainstream purchasers.”
The smaller than usual February rise has led to a substantial fall in the annual rate, with initial asking prices now 9.1% below those of a year ago, compared to 7.3% the previous month. This is the largest decrease that Rightmove has ever recorded. We forecast that monthly changes in asking prices will return to negative territory over the coming months, resulting in an overall fall of 10% during 2009.
However, as this is an average, it fails to highlight individual properties marketed at considerably below peak prices, often when sellers are being forced to sell quickly. The number of sellers coming to the market remains at record lows however, with only 75,140 properties measured this month compared to 137,442 at this time last year.
Shipside adds: “New sellers are 45% down compared to February last year. In spite of these being ideal trading-up conditions, discretionary sellers are being deterred by uncertainty over mortgage finance and employment, while pending repossessions were delayed by an informal Christmas amnesty.
Repossessions are still concentrated in relatively few areas of the country, though unfortunately record numbers are rumoured to be in the pipeline with some auction houses scheduling several ‘pile them high’ auctions The availability of good quality property at distressed sale prices is likely to present a wider choice for owner-occupiers as opposed to just investors.”
Even though the anticipated 75,000 repossessions for 2009 could add over 6,000 properties a month to the depressed monthly listing figures, property coming onto the market still remains massively below industry norms. With non-essential moves deterred by the recession, and completed Home Information Packs required before you can fully market from April 6th, this housing downturn looks set to escape the damaging inventory levels of the early 90s, and the supply overhang that currently besets the US housing market. The dwindling number of estate agents should have resulted in a rise in average stock per branch last year, yet this figure fell every month up until Christmas following its peak of 79 in July.
Stagnating inventories and lack of fresh stock lead some agents to suggest a more optimistic initial asking price, influencing a seller to give the most bullish estate agent the instruction to sell. This is a traditional tactic employed at the beginning of every year to attract fresh stock, but is a short-sighted move for both parties in a falling market.
January enquiries are 108% up on last year, setting a new Rightmove record and clearly indicating a pent up demand to move home. This ties in with over half the respondents to our Consumer Survey stating they intend to buy in 2009, in spite of 7 out of 10 of them expecting prices to fall further during the year.
Buying opportunities on the way to the bottom of the market are traditionally more plentiful than those on the way up, and sellers are more open to low offers. There are reports that agents are now struggling to handle the record volume of enquiries, having cut their staffing levels in order to survive. Potential buyers at present seem to be just testing the water however, with some agents reporting 40 or 50 viewings per weekend with no resulting offers, potential buyers are understandably cautious and their intention to buy is also frustrated by continuing constraints on mortgage availability.
Shipside explains: “Estate agents always deal with a vast number of enquiries, often needing to register 100 applicants for every successful sale. However, current pent-up demand is being frustrated by banks,Building Societies and, indeed, the taxpayer contributing insufficient funds to potential borrowers. That leaves a shrinking number of lenders who are cherry-picking the most credit-worthy borrowers, whilst arguing amongst themselves as to who is to blame for this crisis as opposed to solving it.
Some agents report only one deposit-strapped enquiry in 40 being able to get a mortgage, with current deposit and income multiple restraints singling out aspiring first time buyers. Unfortunately, the current enquiry feast is being blunted by the mortgage famine. While leaving a great opportunity for the cash-rich to strike a deal, it also highlights the extent to which the financial sector needs to put its house in order before market recovery can truly begin.”
NAEA chief executive Peter Bolton King commented: “It is too early to say whether this increase in property prices, picked up by several organisations including the NAEA, will continue. The NAEA believes that it reflects that in certain areas the downturn is slowing and hopefully beginning to bottom out, as opposed to heralding the end of the housing slump.
“What is clear is that if confidence is returning to the market in any form, it is the job of the Government and the major lenders to try responsibly to sustain it. The NAEA believes that a complete suspension of stamp duty from the Government, and increased availability of mortgages from the banks, would achieve this.”
