Pre-election jitters saw UK asking prices fall by 0.1% in May

There was an unseasonal drop in new seller asking prices in the UK in May, down by 0.1%, and the first fall in the month of May for five years, the latest index shows.

This means that the average price of a home fell to £285,891 but prices are still up 2.5% compared to a year ago, although this annual rise is down from 4.7% in April, according to the latest date from Rightmove.

The firm suggests that some sellers coming to market were forced to price more aggressively due to buyer uncertainty over the general election outcome so the fall was very much a short term one and asking prices are expected to bounce back again.

‘The unexpected outcome of a majority government has released the brakes on buyer confidence and activity, and will exert some upwards price pressure in the coming months,’ said Miles Shipside, Rightmove director and housing market analyst.

He explained that the new government faces the long term challenge of delivering on an election promise to build 275,000 new affordable homes in the term of the current parliament.

And he pointed out that the current shortage of suitable property for sale, meant that even the election uncertainty only caused prices to drop in three out of the 10 regions, London, which would have been hit hardest by mansion tax, the North East and Yorkshire and the Humber.

He also warned that sellers who think they have the upper hand due to the lack of property for sale should be aware that a surge of new competition could be on the way, giving buyers some extra negotiating power.

In the three months after the May 2010 election there was a 17% jump in the number of properties coming to market compared to the previous quarter. With a majority government in power and record spring traffic on Rightmove, early indications from estate agents suggest that the next quarter could see another surge in property coming to market.

‘Buyers should note that there is often a surge of property supply after an election, as those who have held off coming to market decide to take the plunge. Many potential sellers may have held back expecting a period of hung parliament uncertainty, but they could now decide to catch the late spring market,’ said Shipside.

‘ In a traditional tight stock market an increase in supply of available property and greater competition among sellers to attract buyers may moderate their price expectations and make them more open to an offer,’ he explained.

‘The previous election saw jumps in new seller numbers in all regions of the country, with London and Wales leading the way with over 20% more properties coming to market. There may be a window for buyers to act now in this late spring market before prices rise in the next few months,’ he added.