Cash rich buyers and lack of lending pushing Mr Average out of UK property market

Cash rich buyers seeking out bargain properties are likely to push down prices in the UK’s already hard hit locations, a new hard hitting report suggests.

The latest analysis of the property market published today (Monday February 21) from Rightmove paints a picture of a three tier market emerging.

It says that in the more economically depressed areas of the country forced sales are becoming more prevalent while in elite parts of London prices are rising. Then in the middle is Mr Average who can’t get a mortgage to buy.

Bargain hunting bottom feeder’ investors are expected to become more prominent in the second half of the year and will push prices down in the areas worst affected. And while there is evidence of growing competition to lend in this traditional first time buyer market segment, lenders are not looking to support the greater volume of deposit light first time buyers, it says.

Instead lenders are reportedly gearing up to chase the minority market of equity heavy buy to let investors but this means that mortgage funds are being denied to those who need them most. ‘Agents report that cherry picking lending practices are leading to some dysfunctional and desperate behaviour to solve housing needs,’ said Rightmove director Miles Shipside.

‘Some average sellers of yesteryear are now trading up by letting out their own home and renting the next rung up the ladder as they cannot get a suitable mortgage to sell up and buy a more spacious house. The accidental landlord is now being joined by the deliberate limbo landlord,’ he explained.

‘Meanwhile, professional investors are being funded by lenders to buy starter homes, condemning many of those who would have been first time buyers in the past to be permanent residents of the rented sector,’ he added.

The report also indicates that the number of new properties coming to market remains subdued as a substantial element of the mass market is locked in to their existing homes. Average unsold stock levels per agency branch have now declined for five consecutive months, falling from a peak of 78 properties to the current level of 69.

The main exception to muted new seller numbers is London, which is up 21% on the same period last year. ‘This is further evidence that the more elite and southern based markets have some immunity from the effects of stunted equity growth and problems accessing mortgage finance,’ added Shipside.

The remainder of the country has seen new listing numbers remain more stable, being marginally up by just 6% year on year on the same period last year.

Its report also shows that this month’s new sellers are mimicking last year’s February hike by increasing their asking prices by 3.1% to an average of £230,030, leaving year on year prices virtually the same, up 0.3%.

'Trends during the first six weeks of the New Year normally shed light on how the remainder of the year might pan out. The start of this year is very much a repeat of 2010 and so we expect 2011 to be characterised by what may well be the new norm, with the average buyer of yesteryear locked out of the market,’ said Shipside.

‘Any hopes that transaction volumes may be on the springboard preparing to return to historic norms will have been dashed by lenders’ predictions that 2011 lending volumes will match 2010’s dire levels. Mr Average will be left out in the cold in the buying and selling game unless the beneficiary of a hereditary hand out,’ he explained.

‘The current subdued market volumes are set to be the new norm unless the seemingly never ending discussions between Government and mortgage lenders find some way of increasing Mr Average’s access to lower deposit mortgages without pricing them out of the market,’ he added.