New-to-the market sellers raised their average asking prices again last month to £239,655, an increase of 0.8%, in spite of the credit crunch resulting in a more stringent mortgage environment. Average prices being sought by new sellers are less than 1% lower than the record high of £241,642 in October last year.
Miles Shipside, commercial director of Rightmove explains: “Most sellers coming to the market seem to be ignoring the increased competition from other unsold properties and the challenge buyers now face in obtaining a mortgage. As many of these sellers are likely to be buyers themselves, they seem to be trying to bank a higher figure for their home but want a bargain when they buy. It’s human nature, but in the current market, sellers should price below their competition to achieve more interest now and avoid a larger price drop later in the year.”
Smart pricing is needed and should take into account recent comparable property sales, buyers’ affordability constraints and competing properties on the market. With lower levels of sales transactions, competition is growing. Average unsold property stock per branch has risen from 56 a year ago to 67 now, up from 64 last month, and support forecasts that completed transactions will be below a million this year.
Shipside continues: “Deals are being put together but tend to be at around 10% below peak boom prices. The challenge to sellers is to get smart and accept this new reality. The best price sellers can achieve has fallen – though they won’t lose out if they are then planning on buying as well.”
Fortunately, the levels of new listings remain limited by market conditions, the costs of providing a HIP, and drastic cut backs in new homes. These factors will help prevent excessive over supply from causing the sharp falls seen in many areas of the US housing market. Over the past month, time on the market has seen a substantial drop from 93 days to 82. Although this is to be expected at this time of the year the reduction shows there is a positive base of activity in the market if you are willing to price intelligently.
As the credit crunch shows no signs of easing, there is a risk that lending criteria will tighten even further, causing more damage to the market. To avoid a stagnated market sellers must price realistically now rather than later in the year.
The government needs to act on finding market-led solutions to strengthen the funding markets, rather than merely discuss, as the Chancellor said in his budget statement. Find ways to increase the availability of mortgage funding. And ensure a more efficient working of the interbank lending system.
Shipside concludes: “If sellers were to price more realistically at the same time as lenders were able to normalise lending criteria, we could see a speedier harmonisation of seller expectations and buyer affordability. Until then, there will be a lot of sellers who can’t sell and a lot of buyers who can’t buy, and everyone sitting on their hands.”
Please refer to the Rigthmove website for the latest information on house prices in the UK – http://www.rightmove.co.uk/houseprices.