The average asking price this month is £217,808 down from £222,979 in November, a decline of 2.3% for the month. This means an annual decline of 6.3% for the year, down from 7.1% in November. Estate agents are reporting actual sales prices to be about 25% below peak.
Market overview
In spite of initiatives to keep more owners in their homes, Rightmove predicts 2009 will be the “Year of the Property Deal” as those in financial distress become the unwilling providers of a wider range of more affordable desirable homes. This month’s 2.3% fall now means prospective buyers have seen sellers’ initial asking prices tumble by 5.3% in the space of just two months. The need to sell quickly will not only be the driving force for those coming to market just before Christmas, but also the predominant factor driving many sales next year.
Miles Shipside, commercial director of Rightmove comments, “For those select buyers looking for a quality property and who are willing and able to proceed, 2009 is likely to be the year of the deal. In spite of welcome Government and industry initiatives, desirable property you would not normally see in a forced-sale scenario will be available at prices that are exceptionally attractive for anyone in the position to buy their dream home. Sadly, the best buys will be at the expense of personal distress, but to the gain of the cash-rich who have been sitting on the sidelines. These include those who sold up close to the peak and are now waiting for the right time to re-enter the market. The location of the best quality bargains will be dependant on which popular areas are hardest hit by the credit crunch, with thousands of local markets operating their own supply and demand environment. How this will unfold is very hard to predict, but what is certain is that the traditional mainstream buyers will be the ones left sitting on the sidelines watching these quality deals pass them by, due to a continued lack of low deposit mortgage finance.”
Initial asking prices are now an average of 10.2% below the peak they hit in May of this year. Rightmove predicts average asking prices will bottom out a further 10% down by the end of 2009. Estate agents have reported to Rightmove that sales are actually being achieved at prices roughly 25% below those seen at the peak of the market. There are local markets that significantly differ from the average, with extreme exceptions where sought after properties have held their gains or over supply, driven by forced sellers of similar property styles, have led to peak-to-trough falls of as much as 50%.
On the basis that prices actually being achieved have fallen by a quarter, we predict that overall prices are now within 10% of bottoming out. Due to the chronic lack of both mortgage finance and confidence, the rapidity of the decline is such that we are likely to see prices in 2009 at levels that persuade cash-rich and mortgage-ready buyers to re-enter the market in greater numbers. This will not be a price recovery, however, as the ongoing effects of economic upheaval and reticence to lend will leave prices bumping along the bottom during 2010 as well. Indeed those areas whose major employer or predominant industry sector collapse will face similar long-term challenges to those of the former mining strongholds in the 1980s.
Shipside adds, “It is impossible to accurately predict the bottom of the market and consequently the best time to buy, as you only recognise that moment when you look back at a consistent history of cheaper deals. Buying within 10% of the bottom of the market gives an opportunity to pick up the best of the quality deals, which will be harder to come by during an upturn as they are the first to go when more mainstream buyers come on tap.
We are starting to enter that window of opportunity in some areas, though others have more unravelling to come, dependant on the lottery of employment prospects. In the hardest hit areas where unemployment and distressed sale supply will remain highest for longest, prices will fall further and remain stagnant for longer.”
Shipside goes on, “The current run-rate in volumes of transactions suggests a little over 600,000 during 2009, a level unsustainable with the minimum requirements of the UK economy. This is broadly equivalent to the historic level of demand by first time buyers alone. In essence, the current level of activity is consistent with those buying their first house and never moving again. This is clearly a short term phenomenon as initial household formation is only one element of the need to move, with divorce, job moves, retirement and immigration building up a pressure cooker of pent-up demand for housing.”
"With the cost of home ownership falling faster than renting, the middle of 2009 is likely to see a recovery in volumes giving a similar overall transaction level to 2008 of circa 800,000. The availability of competitively priced mortgage finance and secure employment is critical to a significant increase in sales volumes."
“While we predict 2009 will be the year of the property deal, 2010 will still be a buyer’s market. Speculative sellers wishing to trade up might then start to return in greater numbers. However, in 2009 forced sellers will still be competing for those cash and deposit-rich buyers, who in turn will find themselves competing with each other to pick off the best quality deals. That will provide a price floor where supply remains more limited.
Remember, the majority of property buyers are looking for a home where, on average, they will spend 7 happy years, instead of looking to make a quick buck. Rather than putting your life on hold, buying the right property in 2009, at what is potentially within 10% of the bottom of the market, may be a sensible move for those looking to enjoy their next home for a good number of years.”
