Rightmove’s latest house price index for April has reported that sellers are finally recognising that a decade of rising prices has come to an end.

With average asking prices rising below the level of wage inflation and Bank of England interest rates of 5% compared to 5.75% a year ago, buyers with cash or reasonable deposits are now able to get more home for their money.

However, Rightmove’s detailed figures highlight the challenges the housing market faces and reinforce the need for the Bank of England’s anticipated measures to further improve buyer affordability and confidence.

Average asking prices fell by 0.1%, the first fall ever recorded by Rightmove in April; since 2002 the month has seen an average rise of 2.8%.

Main Points
- Average Property Asking Price £239,521
- % Change in Month -0.1%
- % Change in Past Year 1.3%
- Buyers with financing in place have more stock to choose from and more sellers competing for their attention, as average unsold stock continues to rise
- Annual rate of increase drops sharply from 5% to 1.3%, the lowest level since July
2005

With annual asking price growth down to 1.3%, and average earnings growing at 3.7%, buyers with their financing in place will find that their purchasing power has now improved over the last 12 months. This ongoing improvement in buyer affordability is key to market recovery. First time buyers targeting semi detached homes will find them on average 0.3% cheaper than last month, whilst flats and terraces have dropped by 0.5% and 1.1% respectively.

Miles Shipside, commercial director of Rightmove, commented: “Buyers who have saved through the winter and are now emerging to enter the spring market will find there are deals to be had. It’s a buyers’ market, but only if that buyer is buying for cash or can put down a good deposit. Our advice is to line up your mortgage in advance, because it is harder and more costly to borrow a high percentage. Once that’s arranged, be prepared to negotiate hard. It could be a good time to trade up in the market. Likewise, sellers would be smart to look for buyers with a short chain, as there is more chance of longer chains falling apart with mortgages more difficult to obtain.”

Rightmove reiterates that without the driver of rising unemployment and significant levels of forced sales, the most likely outcome is market stagnation with depressed sales volumes as opposed to substantial price falls. However, an ongoing lack of mortgage funds could trigger a price crash if an increasing number of sellers are forced to seek rarer mortgage-free cash buyers or those with large deposits. As well as being thinner on the ground, these buyers will be able to demand larger discounts.

Mr. Shipside said: “Neither a crash nor the current stagnation is a palatable or politically acceptable outcome. Unless the anticipated steps to be taken by the Bank of England are effective, potential buyers will be impotent to the seduction of lower asking prices, unless they are cash-rich.

In spite of challenging market conditions, sales have not ground to a halt, and deals are still being done. The market therefore has the potential to recover confidence if the right conditions are put in place. The slowdown is a natural market reaction to prices that we knew were overheated, though it has been magnified with the added major complication of the credit crunch.

This reasonable correction in the housing market is in danger of being taken to unreasonable extremes if the freezing of mortgage liquidity continues. Buyers and sellers need to see more positive news on interest rates and mortgage liquidity, so we urge lenders, the Bank of England and Government to be more energetic in making it happen and eagerly anticipate more detail.”