August’s 1.8% (-£4,459) drop in new sellers’ asking prices is the first monthly fall recorded in 2013, though the recovering market means the traditional holiday season price dip is less pronounced than usual.
August also saw a new record asking price for ‘flats and apartments’ property type.
Buyer demand is set to increase further when Help to Buy starts assisting purchasers of second - hand property in January, highlighting the need for greater property supply to meet growing demand and mitigate unsustainable upwards price pressure. It is imperative that Government communications around January’s extension of Help to Buy do not neglect the need to stimulate supply as well as demand.
Miles Shipside, Rightmove director and housing market analyst comments:
“A holiday season price dip is the norm in August, with an average drop in the last five years of over 2%. Even with this month’s below par 1.8% fall , the national average asking price is still up by more than £20,000 so far in 2013. Demand is already on the up, and that’s before the roll - out of phase two of the Help to Buy stimulus.
"It is now critical that the supply of property improves so that the goal of a significant increase in transaction numbers is not over - shadowed by an unsustainable boom in property prices. Flats are most in demand by first-time buyers and buy-to-let investors and we have seen prices for this property type hit their highest ever level as supply fails to keep up with an increase in demand at the bottom of the market.”
The peak holiday month of August is traditionally volatile, with asking price falls recorded every year since 2007. Fewer sellers come to market, down 8% on last month, with discretionary sellers more focused on holidays and content to wait for the busier Autumn selling season. Sellers who do come to market during August tend to have a more pressing reason to sell and consequently price more aggressively.
Shipside observes:
“The underlying recovery in the housing market continues, with the price of property coming to market up in seven out of the first eight months of the year. However, outside of London and the South East it is weaker than the 5.5% annual gain headline figure suggests. Prices in the capital are 10.2% higher than this time last year compared with an average of just 2.8% for the rest of the country.
While prices are up, transaction volumes still remain constrained by risk - averse lenders’ high deposit requirements and a lack of fresh property supply”. We are already seeing early signs of demand outstripping supply and the Government needs to ensure that the current new build Help to Buy scheme, and its extension in January to second - hand homes, deliver more properties onto the market as well as boosting demand.
The number of properties coming to market so far in 2013 is up just 0.2% on the same eight months in 2012, an increase of just 1,664 properties. However, this marginal improvement in fresh supply is outstripped by a 5 % jump in transactions 1 and a 17% annual increase in email leads to agents and developers from Rightmove 2 so far this year. The natural lag between an increase in demand and a corresponding increase in supply could cause a short-term step-up in house price inflation over and above what is currently being seen.
When, or if, property supply responds will be key in determining how long and how marked any inflationary period might be. It is therefore vital that the Government’s communication around the January extension of Help to Buy encourages sellers to take advantage of increased demand and put their property on the market, thus increasing supply. Economic recovery, low interest rates and Help to Buy are all positive factors boosting housing demand.
However, to improve muted transaction volumes further and satisfy pent-up demand it needs to be balanced by more existing home-owners trading up, more landlords selling, more homes being built and more residential conversions from non-residential use. Increased Housing Association and institutional build-to-rent activity are important elements of the overall supply solution.
Shipside adds:
“The clear message is that only if the supply of property increases to meet rising demand will we see a boost in transaction numbers that will mitigate the ‘collateral damage’ of upwards price pressure. Developers’ reaction to the new-build Help to Buy scheme must start to address the structural shortfall of the last two decades and increase the number of houses being built.
"A second key success measure will be an increase in the supply of property to market from those who have put their housing needs on hold since 2007. It is vital that the new scheme frees low-deposit trapped-sellers, encouraging them to come to market and helping to unlock supply shortages.
They are more likely to have established equity and credit-worthiness and be the main beneficiaries, rather than aspiring first-time buyers who are simultaneously struggling to pay rent and save a deposit. Tougher lending criteria following the Mortgage Market Review will also temper some first-time buyer demand and guard against a lending free-for-all like the one that inflated the last property bubble”.
