· New sellers take heed of winter slowdown and chop their asking prices by an average of £7,772(-3.3%)
· In spite of the largest monthly fall ever recorded, new seller asking prices are still up by 1.4% in 2012 – and Rightmove predicts the slow recovery will continue through 2013:
- Rightmove forecasts a national 2% rise in 2013 assisted by greater competition among lenders to lend. However, with inflation running at more than 2%, housing is becoming cheaper in real terms
- New seller shortage will continue to underpin prices, with no significant increase to the circa 1.2 million new listings seen in each of the last three years
- Signs of slight improvement in the market, with average gap between final asking price and sold price narrowing to 3.7% in 2012 compared to 4.9% in 2009, 2010 and 2011
Overview
New sellers have chopped an average of £7,772 (-3.3%) off asking prices this month. While this is the largest monthly decrease ever reported by Rightmove, it follows an established pattern of December drops over the previous eight years.
Miles Shipside, Director and housing market analyst at Rightmove comments:
“December is the most likely month for sellers coming to market to get very real about the price they ask for their home. This year they’ve gone a bit further than ever before, though in truth it is symptomatic of the ‘all or nothing’ pattern of 2012. This summer also saw big falls with the distractions of the Jubilee and the Olympics, though prices did rebound in October. It seems that sellers who come to market at times when they know that buyers’ attention is focused on other events realise that their prices have to be extra keen in order to compete.
Many who put their property up for sale this close to the festive season will have a very good and pressing reason to sell, so Christmas will have come early for those buyers who have been able to bag a bargain. Rightmove forecasts new sellers’ asking prices will increase in 2013 by a national average of 2% Rightmove predicts a slightly more positive outlook for 2013, though the market will remain patchy. A key factor in 2012 has been the strength of the London market, where average asking prices ended the year 6.8% (+£29,527) higher. Last month Rightmove reported that some of the ‘froth’ had started to come off the London market, but in 2013 we predict that the effect of lower price growth in the capital will be compensated for by stronger market conditions and price growth in other southern regions.
On average, The North will experience a continuation of the slight improvement reported in the latter months of this year, though overall recovery will remain much more challenging than in The South. From a national perspective whilst Rightmove’s 2013 forecast is a little more upbeat on the 1.4% rise in new sellers’ asking prices seen in 2012, the balance of pricing power between London and other regions will see a significant shift.
“There are several reasons for a slightly more optimistic market next year”, comments Shipside.
“There is a positive combination of lenders with greater funds to lend and buyers with a five-year itch to move. Many movers have had to put their housing aspirations on hold since the onset of the credit-crunch, but increased competition among lenders and the slow but steady increase in affordability of house prices may help some to finally move on.”
Mortgage Lending
Transaction levels will remain muted, though a marginal uplift is likely due to a slight relaxation in mortgage lending criteria as the Funding for Lending Scheme (FLS) increases successful mortgage applications. We foresee greater competition among lenders, fuelled by the FLS and a desire to hit lending targets in the first half of 2013. This will feed through to a slight relaxation in deposit requirements and interest rates for attractive mortgage applicants.
“On top of the small uplift seen in 2012, we anticipate a further marginal but encouraging boost to mortgage lending giving the wider market a generally more positive outlook next year. This will be particularly welcomed by frustrated first-time buyers”, notes Shipside.
Demand
Pent-up demand remains high, fuelled by frustrated home-movers whose moving ambitions have been on hold since the start of the credit-crunch in the autumn of 2007. Some of this group will find ways and means to make their move happen in 2013. Some estate agents report that October and November were among their best sales months for five years. Evidence of a recovering market this year can be seen in the narrowing of the average gap between final asking price and sold price. This has shrunk to 3.7% in 2012, compared to 4.9% for each of the three years between 2009 and 2011. The latest national house price data from the Office for National Statistics reports September’s average price agreed for mortgage financed transactions was £233,000. Rightmove’s average new seller asking price in July was £242,097 and, assuming a three month time lag for deals to be agreed and mortgages to be approved, there is a very strong correlation.
“In the boom market of 2007, sellers were accepting bids only 2.6% below their asking price”, observes Shipside.
“While the gap has not recovered to that extent, the fact that buyers are bidding closer to asking prices is an indication of greater demand. While cash buyers still have the greatest negotiating power, they are more prevalent and wield less power than they used to. It is estimated that around one-third of all transactions are currently cash purchasers, and this ‘wall of cash’ shows no sign of abating despite earlier predictions that it just couldn’t last. This helps to underpin prices in favoured locations and fuel demand for investor properties.”
Supply
The number of new sellers looks set to remain constrained in 2013 with new listings likely to be around the 1.2 million level seen in each of the last three years. At this level, desirable property coming to market will be in short supply in all price sectors. With many potential sellers still unable to raise the necessary equity to trade up, their homes will remain off the market and this is especially true of ‘first-time sellers’. This will create some upwards price pressure on those well-finished examples that do come to market as cashstrapped buyers favour properties that require little or no improvement. Repossession hotspots exert localised downward price pressure, but their overall their number looks set to fall by around 20% to circa 30,000 in 2013.
Shipside adds:
“While many are still mortgage prisoners trapped in their own home by the curse of negative equity, recent figures show a reduction of borrowers in arrears. With the Bank of England base rate likely to remain unchanged next year, this should help limit the personal misery and market upset caused by forced sales.”
New Build
Developers are unlikely to significantly increase the number of new homes being built while mortgage availability remains constrained. However, mortgage availability has improved through Government schemes such as FirstBuy and NewBuy which are not available to the resale market. The ability to build and sell a profitable product in the limited markets they have been forced to concentrate on has given them a sound footing, especially now much development is on land purchased at post-credit-crunch prices. As a result, those builders who are publicly listed have seen share price growth that will please their investors.
Shipside comments:
“If the object is to house the nation, new build starts remain at worryingly low levels. There is unlikely to be a return to the volumes built pre-credit-crunch without a major jump in mortgage availability, a tougher challenge in the north of the country than the south.”
Regional Overview
- London’s growth in new seller asking prices will slow to around 3% in 2013, as some of the froth comes of all but the super-prime central market
- The South (South East, South West and East Anglia) will also see new sellers coming to market at prices around 3% higher than in 2012. The average will be buoyed by the South East in particular, which has under-performed in recent years. The ripple effect of higher values in London will mean buyers from the capital will find value in the home counties and will find lenders will be keen to lend.
- The North (East Midlands, West Midlands, Wales, North West, North and Yorkshire & Humberside) will see patchy marginal growth of around 1% in new seller asking prices. Investor activity will underpin prices at the bottom end of the market where investors react to rental yields in excess of 6% of the purchase price.
Shipside comments:
“Average national house prices in 2013 will be less affected by the often distorting impact of London. However, this will be compensated for by a stronger market in other parts of The South and a continuation of the signs of life seen in some parts of The North at the back end of this year. Conditions will remain patchy within regions, with new sellers’ pricing power reflected by local micro-market conditions of supply and demand. Sellers of some property types in less desirable locations will remain blighted by the mortgage famine and travails of the wider economy, and they will have to come to the market at lower asking prices if they wish to sell.”
