Rightmove’s House Price Index Reports New Instructions Fall as Prices Stand Still

This month’s small rise of 0.2% (£526) in average national asking prices gives further evidence that the 2006 price surge is coming to an end. The property market appears to be adjusting prices of its own accord in reaction to increasing home ownership costs. A rise in interest rates would add an additional and unnecessary burden to stretched affordability.

Miles Shipside, Commercial Director of Rightmove comments: “Asking prices are at a virtual standstill. The market appears to be correcting affordability issues itself and does not need further intervention from the Bank of England. At this pivotal stage it is likely to do more harm than good”.

First time buyers were the first to be edged out of the market as prices reached record levels. There are now signs that current prices and the increasing costs of home ownership are also affecting the ability of potential sellers to trade up. Consequently, fewer properties are coming to the market. Rightmove measured 123,000 properties newly marketed in the last month. This is the lowest number of new instructions we have seen since January. A shortage such as this would normally lead to substantial price rises, even in the traditionally quiet summer months. However, as stretched buyer affordability starts to bite, there is the unusual dynamic of falling supply with a price standstill as opposed to rises. Average unsold property stocks per branch fell from 65 in July to 63 last month, with estate agents reporting more potential sellers hesitant to place their property on the market.

Miles Shipside adds: “Sellers trading up have been sheltered from rising prices, as they were already on the property ladder. Now the price gap to the next rung has got even wider, some of those thinking of selling are delaying marketing until their own affordability improves. They are now in the same boat as many would be first time buyers”.

The buoyancy of the economy and consequent lack of forced sales mean that most sellers can afford to wait for buyer affordability to improve rather than be forced to substantially drop their asking prices. The market partially re-adjusted during 2005 when average prices remained static. The result was greater sales volumes, followed by a London led southern mini boom. There is an ongoing financial challenge for buyers to meet their housing needs. They now face average asking prices 9.8% higher than this time last year. In addition, there is also the burden of paying increased energy, council tax and mortgage bills…plus the possibility of a further interest rate increase.

We forecast the 2006 increase will drift back to circa 8% for the year, as sellers coming to the market price more keenly to sell before Christmas.

Miles Shipside concludes: “The pent up demand is there, both from first time buyers and existing home owners looking to move. As they are stretched, they are forced to be choosy and look for the best value. Sellers should price competitively and offer less on the one they are buying, as it’s often the only way to do deals in this market”.

About RightMove:

Rightmove is the UK’s leading property website, displaying details of homes for sale or rent to the largest online audience. It has around 75% of all properties for sale and at any time displays a stock of over 850,000 properties to buy or rent, worth around £170 billion. All eight corporate estate agents (those with 100 or more branches) list their properties on the site. The Rightmove.co.uk site receives over 14 million visits every month and has been ranked as high as 7th in terms of most viewed UK website (source: Hitwise).