Rightmove reports that asking prices for residential real estate have dropped by a significant amount, but that hope remains for 2013. The 3.3% decline in prices in November is the result of market distractions caused by the Olympics and Jubilee celebrations as well as persistent credit restrictions, according to analysts. The new year, however, is expected to release some pent-up demand and the hope is that banks will be more willing to lend. Realtors also note that lower asking prices often translate into higher volume, which could help the overall market in 2013. For more on this continue reading the following article from Property Wire.
Residential asking prices in the UK fell by 3.3% in November, the largest monthly fall ever recorded, according to the latest figures published today (Monday 17 December) from Rightmove.
It meant asking prices fell by an average of £7,772, taking the average asking price to £228,989. But the organisation says that there are signs of slight improvements in the market with the average gap between final asking price and the sold price narrowing to 3.7% in 2012 compared to 4.9% in 2011, 2010 and 2009.
It also points out that in spite of the large monthly fall new seller asking prices are still up by 1.4% in 2012 and it predicts that the slow recovery will continue through 2013 with a national rise 2%.
Rightmove says there is reason to be optimistic because there is greater competition among lenders to lend. However, with inflation running at more than 2%, housing is becoming cheaper in real terms.
Looking ahead it believes that new seller shortages 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.
‘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,’ said Miles Shipside, director and housing market analyst at Rightmove.
‘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,’ he explained.
A key factor in 2012 has been the strength of the London market, where average asking prices ended the year 6.8% or £29,527 higher. Last month Rightmove reported that some of the ‘froth’ had started to come off the London market, but in 2013 it predicts 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. 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,’ explained Shipside.
The firm also expects that 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,’ said Shipside.
‘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,’ he added.
He pointed out that 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 and 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. 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,’ explained Shipside.
This article was republished with permission from Property Wire.