Fears of rising interest rates were compounded by reluctance among homebuyers to commit themselves to a property transaction ahead of the expected general election.
In March, househunters on average expected prices to fall 2.6% over the next 12 months, compared to expectations of a fall of just 0.5% in February. 48% of respondents to propertyfinder.com’s survey said they expected prices to fall over the next 12 months compared to just 37% in February.
Mrs Anne Layther from Southfields, London, typified the concern: "I want to be sure I can afford to move so I’m staying put for now. The election is just adding to my sense of uncertainty.’"
Interest rate concerns have increased markedly and help explain the declining confidence. From a low point of 24% in January, now 55% say likely interest rates rises are putting them off.
Jim Buckle, Managing Director of propertyfinder commented: "At the beginning of the year, homebuyers were confident that interest rates had peaked and this injected long lost optimism back into the housing market. However, speculation has intensified in recent weeks that interest rates still have further to rise and this has put buyers on alert that they could be stung with higher mortgage payments. Add that to the fact that an election is just around the corner and everyone expects further tax rises to take another bite out of their household budget and it is no wonder that hopes for the market are deflating."
Buyers and sellers continue to have very divergent views on the prospects for the market. Since confidence in the market began to plummet in the second half of 2004, buyers have been consistently more pessimistic than sellers. In March 2005, buyers expected house prices to fall 2.1% while sellers expected them to rise 1.8% over the next twelve months.
Greater buyer pessimism is further evidenced by the fact that the stock of property on estate agents’ books has been rising steadily as buyers are increasingly unwilling to commit themselves to making offers. This is reflected in the time buyers are taking to find a property they like at a price they are prepared to pay. In March, homebuyers had been looking for property for 23 weeks up sharply from 15 weeks in March 2004. In January 2005 the comparable figure was 18 weeks and in February 21 weeks.
Finally there is a stand-off over asking prices and offers. In March buyers on average made offers 5.2% below the asking price. Sellers, however, said they were prepared to entertain offers only 4.5% below the asking price on average. What’s more, 11% of sellers said they would only accept offers of the full asking price (compared to 18% in February).
Jim Buckle added: "Sellers remain inexplicably more optimistic than buyers. This refusal by sellers to budge on asking prices is causing a stand-off in the market which explains the sharp increase in the time buyers say they have been looking for property. This mismatch in attitudes is depressing the numbers of home transactions and holding the market back. The run up to election is also causing uncertainty amongst buyers, yet we should see a marked pick up in confidence once the dust has settled post-election."
