Economists who said United Kingdom (UK) property prices would improve thanks to a boost from the Olympics had to eat a little crow as the event froze action in the regional real estate market, but now that the festivities have passed it looks as if they may get a reputational reprieve. Rightmove reports that asking prices have jumped 3.5% from the previous month, which is a helpful (if not full) turnaround from the 4.6% average dip that prices took while the Olympics were in session. Average prices in London have seen the most improvement and premium properties will little effected, but modest homes is less prominent places are also faring better compared to the unseasonable summer lull. For more on this continue reading the following article from Property Wire.
The London Olympic Games closed the residential property market in the UK but now the rebound has resulted in average asking prices rising by over £8,000 in the last month.
That is a rise of 3.5% on the previous month, according to the latest report from Rightmove with both sellers and estate agents testing higher prices.
All regions showed increases, with above average rises in London at 4.8%, the South East and the West Midlands both saw a 3.9% increase and the North West saw average asking prices rise by 3.8%.
However, the firm warns that few segments of the market can currently justify higher property values than the price peaks of 2007/2008. Fewer than two in five buyers would arrange to visit a suitable property if they believe it is over priced.
The jump goes a long way towards reversing the Olympic induced price lull over the summer, which saw asking prices of property coming to market fall by 4.6%, some £11,377, over the three months between June and September.
Rightmove says that this price rebound indicates the market is not performing as badly as some feared. However, sellers looking to try for a higher price should note Rightmove research which suggests that only a few segments of the market have a robust statistical case to justify higher property values than seen in the peak years of 2007 and 2008.
‘This month’s jump of more than £8,000 in asking prices is partly an anticipated bounce after the Olympic induced activity doldrums, though with all regions seeing increases it also provides evidence of some life in the market,’ said Miles Shipside, director and housing market analyst at Rightmove.
‘The prospect of a few active selling weeks before the winter slow down means estate agents are keen to attract fresh stock to try and land more buyers. However, this stock building could backfire if they agree to over ambitious pricing to please a seller, as it could curb a potential buyer’s enthusiasm to arrange a viewing if the over-priced alarm bell starts ringing,’ he added.
The upturn in asking prices, in the absence of other positive influences, is most likely attributable to the continued shortage of new property supply, the firm believes. The weekly run rate of fresh property stock this month is down by 0.4% on the same period a year ago, indicating little change in sellers’ willingness or ability to come to market.
Estate agents are also experiencing a squeeze in average unsold stock per estate agency branch. This figure now stands at 72 properties, a near 10% reduction compared to the 78 recorded a year ago, and much of that stock is stuck on the market at prices that render it effectively unsaleable.
‘After a summer of sporting distractions, optimists may consider lower unsold stock levels and strong pricing to be signs of recovery. However, sellers still need to be mindful that the window of opportunity to sell before the traditional winter slowdown is a narrow one, and they risk being left out in the cold for months until the spring market thaw,’ explained Shipside.
‘In addition, estate agents are reporting that mortgages are still no easier to obtain, with risk-averse lenders nit-picking every detail of the mortgage application paperwork, even from buyers who seem squeaky clean,’ he added.
Those segments that have performed best are the ‘top quartile’, representing the 25% highest priced properties in each region. This underlines the credit crunch resilience of higher- end buyer demand supporting higher end values, said Shipside.
However, the average property values of those 25% highest priced properties still fall short of their 2007/2008 price peaks in most regions, the exceptions being London and the South East. Unsurprisingly, London’s top quartile shows an average 17% increase in property values compared to its peak four years ago. The South East’s top quartile is just 1% ahead of its January 2008 price peak.
‘The performance of the top property price quartile in all regions of the UK compared to the less expensive quartiles is another example of how the post credit crunch market clearly favours the property rich. Except in current hotspots, few of those who bought close to the peaks of 2007/2008 can realistically expect a higher price now, and many who did so with a minimal deposit are likely to be in negative equity,’ said Shipside.
‘Buyers from that era should not lose hope as there are obvious exceptions such as areas that have had the benefit of inward investment, locations that suffer from a shortage of desirable properties, and property that has undergone considerable improvement,’ he added.
For sellers that are looking to test higher prices, research from Rightmove also finds that only 38% of buyers would actually make the effort to view a property they consider to be over priced. The remaining 62% stated that they would not initially arrange a viewing inspection even if they considered the property met all their search criteria.
‘If the first impression of a property gives a buyer cause to hesitate, you often don’t get a second chance. If your property has all the right ingredients to attract a buyer, but they consider the price to be over cooked, you may fail to give them a proper taste of what your property has to offer. Many buyers make their property decision from the outside looking in, and anything that deters them from being tempted inside means they could boycott your property in favour of one they immediately judge to offer better value,’ Shipside pointed out.
‘Pricing high with a view to negotiating down can work in a market where buyers are less price-sensitive. But remember our research also shows that properties in the upper price quartiles have performed best since the onset of this economic downturn. In addition, most property values are still below previous peaks, so some sellers may need to price more keenly to be a more compelling buy,’ he added.
This article was republished with permission from Property Wire.