Average asking prices of properties new to the market fell for the first time in 5 months, suffering a slight
decrease of 0.4% in the month up to the 13th June, Rightmove has said.

In spite of this hesitation from new sellers, Rightmove found that this year’s price recovery still sees asking prices up 6.0% since January, fueled by a shortage of saleable property and the equity-rich calling the
bottom of the market.

Miles Shipside, commercial director of Rightmove comments: “For the equity-rich, 2009 has turned out to be the year of the property deal. Those with a good deposit and a stable job are now finding they can afford a better property than two years ago. This puts them in pole position to snap up the short supply of saleable property in the most popular areas. The south appears to be leading the way in terms of increased activity as it has a higher concentration of the mortgageable equity-rich, which conversely means property coming onto the market is in shorter supply as there are fewer forced sellers.”

The shortage of new sellers continues, though there has been a modest increase of around 10% compared to the previous three months. There is evidence of a real north-south divide. The number of new sellers in the southern regions of the South East, South West, East Anglia and Greater London are down by 45.3% on the same period in 2008, while the rest of England and Wales has seen a 40.1% fall.

A combination of lenders’ risk bias towards southern deposit-rich buyers and less fresh saleable stock would therefore suggest a speedier price recovery in the south. Rightmove added the potential for future price rises is particularly marked in Greater London where the year-to-date supply of new-to-market properties is down 52.3% compared to the same period in 2008. By contrast the ‘North of England’ region has seen 33.8% fewer properties coming to the market, helping maintain supply and keep prices depressed. This is reflected in average falls in initial asking prices being greater in the North of England region, with the largest annual decrease of 10.5% (£16,648), while new sellers in Greater London have only marked their asking prices down by 0.5% (£1.870).

Miles Shipside adds, “It’s a mistake to confuse the upturn in enquiries and sales with a return to a more normal market. While conditions are much improved on the darkest days of last year, we are now starting to see some big distortions and wild swings due to the combined effects of recession and restricted mortgage availability. As the best deals on property and mortgages are only open to the equity-rich, the new stock that agents are looking to attract has to match what these purchasers want to buy and can afford. Perennially popular areas with good schooling are in, while flats in large blocks and terraces requiring major works are out, meaning new sellers are having to adjust prices accordingly.”

Main Points
Average Property Asking Price: £226,436
Asking prices fall back by 0.4% (£1,005) as new sellers hesitate, following 4 months of rises
Prices still up 6% in 2009 as equity-rich snap up restricted supply of saleable properties
New seller shortage most acute in the south
Mortgage famine exacerbated by rising lender margins and interest rates

The hesitation in asking prices after four consecutive monthly rises appears to highlight that, while new stock remains in short supply, new sellers are having to vary their prices to match local buyer demand. Initial asking prices for detached properties are down only 5% on a year ago for example, whereas Rightmove recorded the highest fall on terraces, which are 7.4% down. With lenders demanding larger deposits, and with both lenders and mortgage surveyors being more conservative, a run-down terrace which might require a retention against the mortgage advance until renovated is not as saleable as one already improved. Similarly, a mortgage valuation on a flat in a large block will be marked down substantially if there is evidence of repossessed properties within the block being sold at fire sale prices.

A large rump of less saleable stock remains, with average stock per estate agency branch remaining stubbornly consistent at just over 70 for the last six months. Rightmove said it would normally expect this to fall, given the lack of new stock coming to market, and the pick-up in sales and mortgage approval figures. This confirms reports that fresh stock of the right type is saleable if priced correctly. However, older stock is far less saleable if it does not match current mortgage lending criteria. Rightmove reported a further 62,519 price reductions this month of 2% or more in Rightmove’s Property Deal Weekly, compared to 59,072 in their May report.

Given lenders’ tight lending criteria and their raising of fixed rates, the pool of potential first-time buyers who can mop-up this less saleable stock, which includes repossessions, is reducing further. Lenders want lower-risk buyers with larger deposits who naturally buy in better areas, not where repossessions tend to be concentrated. Sales of these lower-end properties now rely heavily on price sensitive cash investors, as buy-to-let mortgages are part of a previous era. Whilst the spring resurgence of interest includes more first time buyers, their average deposits are up from circa 11% a year ago to 25% according to recent figures from the Council of Mortgage Lenders. This clearly limits the number who can play a vital role in completing the bottom of chains.

Mr. Shipside concluded, “Interest rates for fixed-rate mortgages are now increasing, in line with money-market
expectations of higher medium-term interest rates. Property deals appear within the grasp of cashstrapped
first time buyers, but every rise in fixed rates frustratingly nudges them a bit further out of reach.
Lenders need to be wary not to choke off the recovery in affordability and activity by punishing the
returning buyers with ever widening margins.”