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Momentum building in UK housing market as asking prices rise to a five year high for March

Asking prices have increased by 1.7% or £3,969 since February to take the average house price to £239,710 and there is a growing belief in the market as price stability builds momentum, says the firm.

Rightmove’s latest Consumer Confidence Survey of more than 40,000 respondents shows that 60% of home movers believe prices will be  more or less the same in a year’s time and a further 23% expect prices will be higher, the index also shows.

And there is the potential for transaction volumes to increase in 2013 as although there has been a 12% increase in new seller numbers, unsold stock remains little changed indicating and increase in sales.

On top of this properties are selling faster. The average time on the market is now 80 days compared to 90 days this time last year. But the speed and the recovery of the housing market is being slowed by sluggish lending, according to Miles Shipside, Rightmove director and housing market analyst.

‘In today’s turbulent world where economic crises seem more likely to re-appear than disappear, any market upturn will take longer to build home mover confidence to the point that it starts to feed through to actual transactions. Even those who truly believe that the market has turned a corner may be unable to do anything about it due to lenders’ cautious risk profiling, a significant factor limiting the speed and strength of the recovery,’ he said.

‘However, with new sellers expectation among home movers of price stability or growth, there is now a bedrock upon which confidence and momentum appear to be building,’ he added.

The previous peak achieved at this time of year was set in 2008, just six months before the collapse of Lehman Brothers in September of that year. This new March record comes at a time when several of Rightmove’s indicators provide evidence of growing momentum in the market that should deliver an increase in transaction numbers this year.

‘Positive sentiment on the future direction of property prices is a vital element in motivating more people to buy including those looking to trade up. If they feel confident that prices aren’t going to drop, some will take the plunge, while those who are predicting price rises often judge it wise to act sooner rather than later if they perceive delaying will mean they pay more. Whilst outlooks on property prices differ and remain patchy according to location and property type, overall there appears to be an upturn in confidence,’ explained Shipside.

The Rightmove data also shows that despite a 12% month on month increase in new seller numbers, unsold stock per estate agency branch has remained little changed, up from 64 properties last month to 65 this. This suggests an increase in the number of properties being sold and removed from active marketing. This bodes well for transaction numbers in 2013. With March’s average time on the market also falling from 90 days last year to 80 days this, property appears to be finding buyers more quickly.

‘Whilst it is too early in the year to make estimates about full year transaction volumes, agents are reporting more properties being sold subject to contract. However, these prospective buyers still have to complete the potentially treacherous journey through to successful completion. A sense of urgency has previously been sadly lacking, but there’s nothing like a few Sold boards appearing on local streets to motivate buyers to make a decision about which they had previously been prevaricating,’ said Shipside.

‘More limited inventory for sale by agents means less choice for buyers and is usually a forerunner of increased property prices. Some of the price gains made in the first half of the year often fall away in the second half, but this year it is possible that the air of optimism will result in those gains being retained,’ he added.

Buy to let activity is also increasing. Rightmove research shows that rents are delivering average gross yields of 5.9%. With some remortgage finance available at lowest ever levels, from as little as 2% for a two year fixed rate and 2.7% for a five year fixed rate, there is the possibility of a straight arbitrage of immediate return on money borrowed against your main residence.

‘There are blindingly good returns on the right buy to let investment, with the Funding for Lending Scheme giving the possibility of an immediate and enticing profit gap between borrowing costs and available rental returns. With the prospect of capital growth in future years if you buy the right property, you can see why investors are piling in to the rental market,’ said Shipside.

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