Lack of lending leads to sharp increase in real estate stocks in UK, report shows

In London, the surge of stock means there are double the number of new properties on the market compared with this time last year, and asking prices fell slightly by 0.4%, the latest report from Rightmove shows.
 
The week before Britain’s May 6 election saw the biggest increase in new sellers since June 2008, but there was a sharp rise in unsold property because of a lack of mortgage finance for buyers, Rightmove said.
 
Overall asking prices rose by 0.7% in May compared to 2.6% in April and the first price decline for the Rightmove index since December 2009. It also brought the annual rate of increase down from 6% to 4.3%, suggesting that the real estate market is cooling after months of price increases.
 
The situation contrasts with 2009, when demand far outstripped supply, leading to buyers snapping up available properties, causing prices to rise.
 
A surge of new sellers coming to the market and a crippling of demand due to the mortgage drought has led to agents being stuck with more unsold properties. Rightmove’s data is based on property advertised on its web site, which it says accounts for around 90% of property for sale in Britain.
 
‘Sellers are starting to reduce their pricing expectations to court the fewer buyers who are able to proceed, though the number of buyers who can purchase is too low to bring volume back to the housing market,’ said Miles Shipside, Rightmove’s commercial director.
 
Shipside explained that potential buyers remain in a difficult position as they are being ‘marginalised’ by lenders continuing to demand large deposits and high credit worthiness. He said first time buyers and property investors were ‘particular casualties of the finance famine’.
 
‘The market has to either operate at reduced sales volumes or hope that sellers can sell to each other, forming circular chains by trading up and down. This is a much more inefficient model, with less chance of sales success and longer lead-times,’ he said.
 
‘While new stock levels remained low, this inefficient market was able to maintain prices as long as supply broadly matched demand. With more sellers now marketing, this uneasy equilibrium is in danger of becoming unbalanced. There aren’t enough ready and able buyers to soak up a surge in fresh stock,’ he added.
 
Over the last month Rightmove has been recording in excess of 30,000 new listings a week. The last time this happened was in the week starting June 28, 2008. It puts the amount of unsold stock per agency branch at 71.