New seller asking prices in UK down slightly in November, calming bubble fears

New seller asking prices in the UK fell by 2.4% but this is in line with the normal trend for the pre Christmas period, according to the November index from Rightmove, the country’s most visited real estate website.

The fall is less than usual for the time of year with the average November fall over the last three years amounting to 3%. It takes the average price of a home to £246,237, a fall of £6,181.

The data also shows an annual price growth of 4%, the highest seen since November 2007 but fears that housing stimulus schemes are in danger of creating a price bubble look overblown, said  Rightmove director and housing analyst Miles Shipside.

He pointed out that strict lending criteria means that Rightmove director Miles Shipside said efforts by the Financial Conduct Authority were a repeat of the previous decade's housing bubble is unlikely. Mortgage lenders are implementing the recommendations of the Financial Conduct Authority’s recent Mortgage Market Review which apply tighter rules when assessing borrowers’ ability to repay.

‘Those fearing a return to a credit fuelled bubble will be reassured by the teeth of the new rules and how they are clamping down on the aspirations of some of the early hopeful applicants into the Help to Buy mortgage arena,’ said Shipside.

He also said that the much hyped phase two of the Help to buy scheme is not really having much impact as it is too early to measure. The Rightmove report also reveals that one in four potential home movers are not aware of the scheme’s second phase being launched and some have not heard of Help to Buy at all.

‘There is no doubt that Help to Buy has helped raise frustrated movers’ interest and hopes. However, our survey draws on a massive sample size of those who stand to benefit most from Help to Buy, so there is more work to be done by government and industry if one in four of those who are currently hunting for property risk missing out on a leg up onto the ladder or a welcome shove up to their second home,’ explained Shipside.

Estate agents report that few Help to Buy mortgage applications have so far been approved but they said that it has definitely contributed to the growing mood of optimism. Some agents report very few approvals, and one of the active Help to Buy lenders has so far approved only 169 mortgages out of 1,075 applications.
‘While there is a processing time lag, and we need time for both the Help to Buy scheme and the mortgage market to settle down, the feedback from agents seems to be that you have to be squeaky clean and the chances of being approved are better with at least a 6% rather than 5% deposit,’ Shipside pointed out.

‘Ironically, those predicting a bubble may be talking the market up and creating the very price momentum that they fear. With only two lenders currently in the game and agents saying that more applications are being turned down than approved, the current hype looks to be over done given the tighter rules now enforced,’ he added.

Overall the firm believes that the underlying market recovery is well underway and momentum is building for 2014. Site traffic on Rightmove has increased 30% since the Help to Buy announcement in September compared with the same period in 2012.

‘At this time of year, it’s mainly those with a more pressing need to sell that come to market, driving average asking prices down. It takes a lot to throw people off course from marketing after rather than before Christmas, and in spite of the most positive selling environment since the start of the credit-crunch in 2007, it seems potential sellers will not scratch their seven year home moving itch early and will be waiting until at least 2014,’ said Shipside.

‘Estate agents expect a more buoyant 2014, as they pick up early signs of an increase in buyer interest and demand, so this side of Christmas could be the time for eager buyers to hunt out keen sellers and do a deal. However, agents’ challenges differ wildly depending on local market conditions. While some are really concerned about future sales because of a lack of fresh sellers, others report some sellers getting too brave too early on their asking price aspirations in less active parts of the country, potentially stifling a recovery before it has got going,’ Shipside added.