Latest Rightmove Asking Prices

[rantnrave]

Hot off the presses - 45 mins early.

-2.1% MoM YoY finally NEGATIVE at -0.3%

http://www.rightmove...august-2011.pdf

Edited August 14, 2011 by rantnrave

[beccles]

[Mixle]

[Guest_James Toney_*]

excellent

should all be negative from now on

[rantnrave]

Very bullish report though...

Until you remember it's asking prices.

[rantnrave]

Overview

As we approach the fourth anniversary of the demise of Northern Rock, formerly the UK's fifth biggest mortgage lender, the country's housing market remains in limbo as the renewed crisis in the world's financial markets puts any thoughts of a recovery on hold. With August's 2.1% fall in new sellers' average asking prices, they remain almost identical to those of a year ago (-0.3%) and not much different to four years ago (-4.1%). There is evidence that the unique upside factors of the country's housing market have found an uneasy balance with the downside risks, which may well insulate it from major price falls or further deterioration in transaction volumes in spite of the ongoing financial crisis.

Miles Shipside, director of Rightmove comments: "While the world's financial jitters are now playing havoc with stock markets and our future pensions, there are bound to be concerns about the impact on assets held as bricks and mortar. While the repeated shocks to the financial system have severely limited transaction numbers compared to pre-credit-crunch levels, the last four years have seen them stabilise, with an uneasy balance developing between those that have a pressing need to sell and those that have a good reason and the capability to buy. Sellers' initial asking price aspirations have remained remarkably stable, and in spite of the continuing global economic unrest, the UK housing market has several unique factors that should help to insulate it from downside risks".

This month, new sellers' average asking prices have dropped by 2.1%, following the post-credit-crunch pattern of falls in August that has remained consistent since 2008. However, although this is the fourth year of economic uncertainty, the average price at which new sellers market their properties remains in the same ball-park when compared to both last year and the onset of the credit crunch in August 2007. These figures show that the country has avoided the downward spiral of widespread price slashing that has been a common feature of the property downturn in many other countries with similarly highly geared housing markets. While local conditions vary, overall the upside factors that are unique to the UK mainland look set to continue the awkward but stable status quo.

Shipside adds: "We're in a 'limbo-land', where a restricted number of motivated sellers are trying to match themselves up with the similarly restricted number of financially capable buyers. In many parts of the country transaction levels are limited to the number of sellers who are willing to price aggressively below the competition and can afford to do deals. It seems that this stalemate can continue indefinitely, until it is broken either by an improvement in upside factors, such as a relaxation of mortgage finance, or by a further marked deterioration in employment and a corresponding increase in forced sales at bargain-basement prices."

The upside factors that are restricting supply are:

- Supply of new sellers remains subdued at 30% below August 2007 levels, as lack of confidence and/or ability to come to market stops an oversupply of sellers from bidding each other down;

- Bank of England base rates now look set to remain unchanged until at least 2013. As well as helping those whose finances have deteriorated to service their debts and remain in their homes rather than becoming forced sellers, it is a further boost for deposit-rich buyers. Their mortgage rates are set to remain historically cheap, helping to fund their trading-up or other housing investments. This may include expansion of buy-to-let portfolios to satisfy demand from the growing number of new households, which is also encouraged by the poor returns available on most other types of investment;

- Supply of new-build properties is falling further and further behind the increase in the number of households. The UK is currently building fewer than half as many new homes as its demographics require, meaning the backlog is growing at an alarming rate;

- Mortgage approval levels have been running at a monthly average of just under 50,000 for two consecutive years, and so seem to be offering a consistent, albeit constrained, level of funding.

However, there still remain some downside risks for the housing market, which may yet lead to more significant falls in house prices:

- Employment levels have thus far remained stronger than expected in the economic downturn. However, a renewed slowdown in the global economy driven by concerns about sovereign debt in the Eurozone and the United States could lead to more widespread unemployment. This in turn would both reduce the number of buyers willing and able to proceed and result in more forced sales, undermining prices in the surrounding market. Lender forbearance has been assisted by a low interest rate environment limiting the growth of arrears, plus the degree of property price resilience. Should that resilience begin to falter and undermine the value of their mortgage book, it will force lenders to adopt a harder line, leading to more forced sales and a vicious circle of further price falls;

- A further increase in sovereign debt risk would again undermine trust in the banking sector, leading to restricted inter-bank lending and an increase in inter-bank interest rates. This renewed credit squeeze and increase in the cost of borrowing would then impact mortgage availability and rates and drive down the number of buyers;

- The Bank of England could increase base rates prematurely, driving many struggling homeowners over the edge into forced sale or repossession;

- Further unanticipated shocks to the financial sector could also heighten individuals' concerns over their personal finances and damage market sentiment, leading to short-term periods of buyer paralysis.

Shipside comments: "We are four years into this journey, and it still looks like a long road ahead. The UK does not have the chronic over-supply of property seen in many other countries, due to restrictive planning laws and tight central control of local government finances, leading to low levels of new build in both social housing and the private sector. Demand for housing is high due to demographic changes, including net immigration, boosting household numbers. These factors give our housing market more balance and stability, but perversely prevent a possibly quicker but more painful route to recovery via lower prices with higher transaction volumes."

Edited August 14, 2011 by rantnrave

[bajista]

No, no .... there must be some mistake. London drops are the biggest and there are falls in every London area. How can that be? London is supposed to be protected by the global billionaire market....prices should be heading for infinity ..etc. etc. etc.

[NEO72]

Very bullish report though...

Until you remember it's asking prices.

I thought it seemed fairly balanced myself. Although he doesn't take into account the possibility that the current market is not sustainable in terms of the number of FTBs with 25% deposits propping it up - with low mortage rates and the stamp duty holiday, could FTB demand (in terms of desire and ability to pay) be being brought forward? Just how large is this pool of cash-rich FTBs?

Also, whilst claiming base rates to be an upside, he doesn't take into account the unintended consequences ie inflation and the effect that will have on both servicing mortgages and saving deposits.

[Aidan Ap Word]

No, no .... there must be some mistake. London drops are the biggest and there are falls in every London area. How can that be? London is supposed to be protected by the global billionaire market....prices should be heading for infinity ..etc. etc. etc.

+1 .. the great statistics skew breaks ... I wonder what the headlines will look tomorrow. "Bumping along the bottom" doesn't sound that promising to me.

[Aidan Ap Word]

I am particularly amused to see that London's best performance is Ealing.

Somehow I don't think that things like Ealing Gazette article will help.

[athom]

Shipside adds: "We're in a 'limbo-land', where a restricted number of motivated sellers are trying to match themselves up with the similarly restricted number of financially capable buyers. In many parts of the country transaction levels are limited to the number of sellers who are willing to price aggressively below the competition and can afford to do deals. It seems that this stalemate can continue indefinitely

sounds so much not like the sort of situation that will result in an indefinite stalemate. In fact more like "keep your arms inside the car" territory

[peter_2008]

It's crashing big time in my area. Banks are turning down mortgage without even sending a valuer, if the valuation is not at least 30% less than 2006/2007 value.

[rantnrave]

It's crashing big time in my area.

Tottenham?

[Giordano Bruno]

+1 .. the great statistics skew breaks ... I wonder what the headlines will look tomorrow. "Bumping along the bottom" doesn't sound that promising to me.

"Bumping along the bottom"

We are nowhere near bottom yet.

[Vagabond]

Shipside comments: "We are four years into this journey, and it still looks like a long road ahead. The UK does not have the chronic over-supply of property seen in many other countries, due to restrictive planning laws and tight central control of local government finances, leading to low levels of new build in both social housing and the private sector. Demand for housing is high due to demographic changes, including net immigration, boosting household numbers. These factors give our housing market more balance and stability, but perversely prevent a possibly quicker but more painful route to recovery via lower prices with higher transaction volumes."

Decent summary. 10 years of flat prices with low volumes it is then.

[Cinzano Bianco]

Decent summary. 10 years of flat prices with low volumes it is then.

The upside being a lot less estate agents exist in 10 years time

[The Masked Tulip]

It's crashing big time in my area. Banks are turning down mortgage without even sending a valuer, if the valuation is not at least 30% less than 2006/2007 value.

Which area?

How do you know lenders are doing this?

[zilly]

Decent summary. 10 years of flat prices with low volumes it is then.

Never works like that, though.

Rewind to 1991/1992 and there were lots of articles talking of soft landings (and indeed the imminent start of a new boom).

Once buyers get a sniff of a faltering market, they start to make lower offers. They feel that due to prices drifting downwards they have to 'factor in' future falls.

It mostly isn't a matter of supply/demand, or even economics.

Just as with the bull market frenzy, it's mostly a matter of psychology.

Just as the effect snowballs on the way up, so it snowballs on the way down.

Also, those who think inflation will help maintain house pries are deluded.

With wage inflation nowhere near price inflation, all inflation is doing at the moment is making it harder to buy a house.

[StainlessSteelCat]

Good to see this as the divergence was getting ridiculous. Rightmove is still a fairly worthless index though.

[MrFlibble]

Never works like that, though.

Rewind to 1991/1992 and there were lots of articles talking of soft landings (and indeed the imminent start of a new boom).

Once buyers get a sniff of a faltering market, they start to make lower offers. They feel that due to prices drifting downwards they have to 'factor in' future falls.

It mostly isn't a matter of supply/demand, or even economics.

Just as with the bull market frenzy, it's mostly a matter of psychology.

Just as the effect snowballs on the way up, so it snowballs on the way down.

Also, those who think inflation will help maintain house pries are deluded.

With wage inflation nowhere near price inflation, all inflation is doing at the moment is making it harder to buy a house.

Nicely summed up. The market could do with some fear right now to help it down.

[The Masked Tulip]

Nicely summed up. The market could do with some fear right now to help it down.

Summer is coming to an end - a lot of people who confidently thought they would sell 6 to 8 months ago must now be getting nervouse at lack of interest.

In my part of the UK EAs ramp up August as being a lousey month for selling a house - blame people being on holiday - and then they say that Sept is the bumper month. So loads of sellers no doubt are being convinced that they only have to wait for Sept to sell.

[TheCountOfNowhere]

Like the worm, sentiment, has turned.

[Buccaneer]

Never works like that, though.

Rewind to 1991/1992 and there were lots of articles talking of soft landings (and indeed the imminent start of a new boom).

Once buyers get a sniff of a faltering market, they start to make lower offers. They feel that due to prices drifting downwards they have to 'factor in' future falls.

It mostly isn't a matter of supply/demand, or even economics.

Just as with the bull market frenzy, it's mostly a matter of psychology.

Just as the effect snowballs on the way up, so it snowballs on the way down.

Also, those who think inflation will help maintain house pries are deluded.

With wage inflation nowhere near price inflation, all inflation is doing at the moment is making it harder to buy a house.

I wonder how many prospective buyers check what prices similar properties have recently achieved before proceeding with a purchase. Unlike in 91/92 this time around actual sold prices are readily available on the internet. It only takes one sale to set the new benchmark.

For example; in one area that I have been looking at, apartments in a block which originally sold at 145k to 155k in 2006 are being initially advertised for resale at 110k then reduced to 99k but still not selling. Until recently none have been resold and so all the land reg figures show the original purchase prices. Prospective buyers may look at the 2006 prices and compare them with the current rightmove advertised prices and think that they are getting a bargain. Now one unit has sold at 88k and so in a few months when this has been logged into the land reg numbers anyone can see that the benchmark rate is not 145k but 88k. So with flat to falling indices someone looking for a good deal will start with a price expectation of less than 88k.

So I agree that once it starts it will snowball.

[Small Potatoes]

Like the worm, sentiment, has turned.

But will the BBC etc report it so that the public at large get to see it? It's no good if it's only us on this site reading the bearish reports.

[MrFlibble]

Summer is coming to an end - a lot of people who confidently thought they would sell 6 to 8 months ago must now be getting nervouse at lack of interest.

In my part of the UK EAs ramp up August as being a lousey month for selling a house - blame people being on holiday - and then they say that Sept is the bumper month. So loads of sellers no doubt are being convinced that they only have to wait for Sept to sell.

Been watching a place in my old neighbourhood that came on at 14% less than anything else of the same type. Sellers were looking for a cash buyer who could move fast, probably due to a breakup or job loss. Looks to have sold now after about 2 weeks, most probably to a BTLer as the area is infested with them - one of the reason I shoved off.

Personal feeling is the price they were asking was on the money at around 23% less than peak - still not a steal though IMHO, which leaves all the others up for sale well overpriced.

The market needs a good kick up the backside, at least £2k a month should be coming off the average price IMO.