New sellers’ average asking prices are up by 1.6% this month and are seeing their strongest start to the year since 2004, fuelled by the continuing shortage of suitable stock and a jump of 16% in search activity on Rightmove during the first quarter.
While these statistics indicate increasing confidence in some sectors of the market, Rightmove said the recovery remains patchy and because transaction volumes remain low, the market is sensitive to external influence.
There is evidence that first-time buyers are working hard to raise the substantial deposits required to access mortgages that allow them to get onto the housing ladder.
However, they are now faced with the double blow of losing their 1% stamp duty exemption between £125,000 and £250,000 and asking prices circa 3% higher than a year ago on their target market of terraces and flats.
Miles Shipside, director of Rightmove, said: “For a first-time buyer it’s already hard enough to raise the necessary deposit and now, as well as potentially losing between £1,250 and £2,500 in stamp duty exemption.
“And asking prices for their target property types have increased by over £5,000 in the last year as well.
“The stamp duty holiday was designed to promote activity in the moribund housing market, helping first-time buyers to get onto the housing ladder, and as a consequence releasing others to climb up the rungs too.
“With some promising indicators of activity so far in 2012, there are finally some signs that this is playing an important role.
“The question is: can the Chancellor afford to spring a surprise and extend the stamp duty exemption?
“If not, what are the potential costs of leaving the UK re-sale property market without any incentives?”
Shipside said the recent launch of NewBuy may counteract some elements of the removal of the stamp duty exemption.
But he added: “Due to its focus on the new build sector, to support Government’s efforts to create jobs, this is of little consolation to those people looking to buy or sell on the resale market.
“The 110,829 properties marketed by estate agents in the last four weeks saw average asking prices rise by 1.6%, the highest figure recorded in the month of March since 2004.
“This is on top of the very strong 4.1% rise reported in February, and has resulted in a 4.9% rise so far in 2012.
“This is also the most buoyant new year price bounce since 2004, when prices surged by 5.0% in the same time frame.”
With estate agents both north and south reporting some encouraging seams of activity in select market sectors, average asking prices are now 2.2% higher nationally than a year ago.
Those property types favoured by first-time buyers have seen the largest price rises in the past 12 months.
Terraces are up by 2.8% and flats have risen by 3.1%, outperforming semi-detached and detached property types.
This suggests a pick-up in activity from first-time buyers and buy-to-let investors at the lower end of the market.
However, sellers of properties between £125,000 and £250,000 will be concerned that the loss of the first-time buyer stamp duty incentive reducing their target audience of potential buyers.
Around 40% of the properties currently on Rightmove are priced within in this bracket.
Shipside added: “First-time buyer attempts to get onto the property ladder are often frustrated by competition from investors whose large deposits make them a lower risk prospect for lenders and a safer bet to sell to.
“With the pending removal of the ‘stamp duty exemption ace’, first-time buyers have even fewer cards to play in their attempts to get onto the housing ladder.
“With potentially fewer active first-time buyers in the market between £125,000 and £250,000 there will also be concern for the two out of five sellers currently on the market in this price bracket”.
Research by Rightmove amongst first-time buyers intending to buy in the next 12 months indicates that over half (52%) are able to put down a deposit of between £15,000 and £40,000.
Shipside said: “It’s a kick in the teeth if you have saved hard, or begged and borrowed a meaty deposit and have just missed out on the bonus of avoiding stamp duty.
“There’s the hope that sellers will take a lower offer to compensate, but that pre-supposes they can afford to do so or there is not a cash-rich investor buyer waiting in the wings.
“The alternative may be to look at whether NewBuy is a viable option to make your home ownership dreams a reality, but that pre-supposes you are interested in a new build property.”
New sellers’ asking prices in London have reached a new peak of £455,159. The traditionally buoyant spring market has combined with a shortage of supply and brisk turnover of property.
The result is another new record for average asking prices in the capital this month, representing an increase of nearly £600 a week over the last year, underlining London’s continuing property market strength.
The average asking price for a property in Kensington and Chelsea has also reached a new peak, breaking the £2 million barrier and now standing at £2,000,120.
