Monday, 18 February 2008Traditional February seller optimism boosts asking prices
Optimism remains robust amongst the fewer sellers who came to the market over the lastmonth. The lowest February level of new listings since 2005 saw average asking pricesjump by 3.2%, (£7,426). It is traditional for asking prices to be driven upwards at this timeof year, with fresh sellers tempted to test the market at a higher price as they have fewertimescale pressures with the year ahead of them. This seasonal factor has beenexacerbated this year with estate agents competing for only 132,000 properties, comparedto 144,000 in February 2007 and 155,000 in February 2006.
There is still some distortion in the housing market from the December deadline for Home Information Packs for properties with two or fewer bedrooms. The lower level of February listings compared to previous years could be partly due to the slower market, but also some speculative sellers may be put off by the additional costs involved in preparing a HIP. We predicted that a lower supply of property post HIPs implementation could underpin prices, and the larger than usual February bounce could be evidence of that. In addition, the size of the average price rise has been exaggerated by more expensive three and four bedroom properties making up a larger proportion of the mix, following the rush of cheaper one and
two bedroom properties to the market in December. Without the HIP effect, average rises in asking price would have been between 1.5 and 2%, more in line with the traditional February bounce.
The 3.2% gain for February counterbalances the 3.2% fall we reported in December, as the cheaper smaller properties beat their deadline. We saw a similar pattern around the HIP deadline for three bedroom properties, with a 2.6% fall in September reversed by a 2.7% increase in October. If we look at the entire period from June 2007, before the introduction of HIPs, to February 2008, we see an overall decrease of just 0.6%. This indicates that for the past eight months prices have on average been virtually static, a flat trend that we have already forecast will continue for the rest of 2008.
Miles Shipside, Commercial Director of Rightmove comments: “Most sellers obviously want to achieve as much as possible for their property, and traditionally they choose to test a more ambitious price early in the year as they have plenty of time to adjust it down later. This is compounded by estate agents being eager to have fresh property on their books and there being fewer to go round, leading to the temptation to try a higher figure. It’s not the start of another price boom, but the interest rate cuts have no doubt given some sellers headier hopes. These are likely to prove to be unwarranted given the high level of existing property that is already on the market and the length of time that it has been there. ”
Whilst sellers have been buoyed by two recent interest rate cuts and the prospect of more to come, they face competition from the highest level of average stock per estate agency branch Rightmove has measured at this time of year... It now stands at 64 compared to 54 for the same period last year. …Average time on the market also continues to be at historical highs… with an average of 93 days compared to 78 days a year ago. Estate agents report that tightening lending criteria with more marginal purchasers is one of the factors hindering sales growth. Sellers should also be aware that lenders and surveyors will be more cautious in the current climate irrespective of asking prices. …However, in spite of some buyers being slower or less able to commit, they are browsing in record numbers to see what’s available with activity on Rightmove up by 22% on January 2007.
Miles Shipside adds: “Fresh stock always creates initial interest when it is launched onto the market, and if the property is desirable you can get away with pitching the asking price a bit higher. However, if there are several similar unsold properties on the market nearby, then it can damage your long term sale prospects as you lose the initial impetus of prospective buyers running their eye over its suitability. If they dismiss it as over-priced and fail to view your property it is in danger of going stale. The market is now highly transparent with every property easily visible on the internet, so it’s very easy for prospective buyers to see what’s priced too high, what’s sticking and what’s a bargain.”Rightmove February House Price Index |