This takes the price of an average home to £270,159 and means that the annual rate of growth has fallen from 7.7% to 6.5%.
However, Rightmove has upgraded its 2014 forecast and says that new seller asking prices will see an 8% annual increase by the end of the year, hitting the top end of its original forecast of 6% to 8%.
The firm also says that there is evidence that the frenetic activity seen in some areas during the first half of the year is cooling, in part due to stricter mortgage eligibility criteria and previously pent-up demand having now been partially satisfied.
However, the significance of the first fall of the year in new seller asking prices should not be overstated in spite of the dampening effect of the more cautious tone from the Bank of
England. July has seen price falls in six of the last 10 years, with this drop largely reflecting a normal seasonal slowdown.
‘A price fall in July is not unexpected as prospective buyers turn their attention to the summer holidays. Buyer confidence may also have taken a knock with suggestions that mortgages are becoming harder to get and repayments may get more costly sooner than originally anticipated should the rumours of an interest rate rise before the next election come true,’ said Miles Shipside, Rightmove director and housing market analyst.
He pointed out that the Bank of England is trying to cool some of the existing and potential excesses of the housing market, with affordability, personal debt and default risk all high on the agenda. The Mortgage Market Review (MMR) and additional high loan to income and stress -testing guidance, along with suggestions of earlier than expected interest rate rises have had a dampening effect.
‘However, while lower than in the latter months of 2013, Bank of England mortgage approvals are still running at an average of over 60,000 a month, 23% higher in the year to date than during the same period in 2013, and 40% above the 48,162 monthly average between 2008 and 2012. It is also likely that current mortgage approval numbers are still being curtailed by the hangover from the implementation challenges of MMR,’ he explained.
‘Market conditions still compare favourably with this time last year, with growth in both the economy and employment, plus a comparative thaw in mortgage availability,’ he said, adding that he does expect that market activity will slow down in the run-up to the election in May next year.
‘Faster turnover of property breeds confidence among potential sellers, bringing more to market. This is important to help satisfy pent-up buyer demand and it also helps to keep a lid on prices if there is more property choice for buyers and more competition among sellers,’ he pointed out.
Rightmove also mentions a trend others have identified in the UK market, the spreading of the London ripple effect. Upwards price pressure continues where the supply of property coming to market remains tight, or the properties on the market are not of the quality that buyers are looking for. This is especially being felt in the London driven southern regions.
While the national average shows the number of properties coming to market is up by 9.4% this year compared to a year ago, supply remains more constrained in the high demand commuter and second home hotspot areas of East Anglia where supply is up 5%, the
South East where it is up 5.8%, and the South West where it is up 5.9%.
London itself has seen a boost in property coming to market, up by 15%, which will act as a brake on prices rising further in areas that buyers judge to have an excess of overpriced or poor quality supply.
‘London has seen a jump of 28% in the number of properties coming to market this month alone compared to the same month in 2013 as some sellers are looking to cash in, move out or commute. That will add to price-rise pressure in the outer London boroughs and neighbouring regions as the ripple effect continues to spill out, and property stocks remain sparse in their target areas,’ said Shipside.
While the annual rate has fallen from 7.7% to 6.5% this month, continuing momentum leads Rightmove to predict new seller asking prices will see an 8% annual increase. Shipside pointed out that while the number of properties coming to market has increased by nearly 10% year to date compared with 2013, the UK suffers from a structural deficit in housing stock, with the more popular areas still having an excess of demand compared to supply.
Indeed demand as evidenced by enquiries sent from Rightmove to agents is up by 27% in the first half of 2014 compared with the same period in 2013, to an average of 3.7 million enquiries per month.
‘We have upped our forecast to the top of our range, because while there is more buyer choice due to increased property churn, the extra supply is not in the main London ripple areas of highest demand,’ said Shipside.
‘In addition, momentum is building in other parts of the country, with the ripple effect having also reached the northern cities of Manchester, Leeds, York and Liverpool. We forecast a slower paced second half of 2014, but with bigger deposit third time movers entering the fray and lenders still having lending targets to meet, there is still enough momentum to see an 8% national average increase in new seller asking prices. The fundamentals for making 2014 the year to the move still hold good,’ he concluded.
