However, the rise means that the average new seller asking price is just £30 below the June 2014, according to the index from Rightmove.
According to Rightmove the upcoming general election could be to blame for the lower than expected rise which was down from 2.1% growth in February.
It says that agents are reporting an increase from buy to let investors and this may be due to the forthcoming changes to pensions which means they can cash in their pension pots and there is a lot of interest in using this to buy property.
The data also shows that the year on year rate of increase has fallen from 6.6% in February to 5.4% in March and the report points out that high demand and larger buyer deposits are reducing the impact of the new restrictions on mortgage lending introduced in the Mortgage Market Review last year.
‘The distraction and uncertainty of an election typically force sellers to price more keenly, though this is often short-lived. The MMR introduced in April 2014 laid out a much needed longer term framework for responsible lending, but within a year its dampening effects have been muted by high demand outstripping supply in many locations, and by buyers putting down larger deposits,’ said Miles Shipside, Rightmove director and housing market analyst .
‘The price of property coming to market is now just £30 off the record set nine months ago. The MMR has been a positive restraint on what buyers can afford to pay and has assisted in lessening the price rise pace. However, with new build levels remaining low and only a small increase in properties coming to market compared to last month, the supply side is still a critical but missing part of the jigsaw if pent-up demand is to be satisfied,’ he explained.
The index report also shows that interest in searching is at an all-time high, with a record eight million enquiries sent to Rightmove agents in the first two months of 2015, and Rightmove’s busiest ever day for activity being recorded towards the end of February.
‘There is still high demand for the right property at the right price with agents reporting that quality stock is selling well despite some election jitters. Rightmove recording nearly 59 million page views in one day suggests that home movers have a confident outlook, while remaining choosy about what they will buy. Attractive long fixed term mortgage rates are obviously another great boost to positive sentiment,’ Shipside said.
‘While some of the heat has been taken out of the market by limiting loan criteria and size through the MMR and the subsequent actions of the Bank of England’s Prudential Regulation Authority, controls limiting buyer affordability appear not to be restraining the more cash rich buy to let sector. This active area of the market, with mortgage loan numbers up by 23% in 2014 compared to 20131 , is set to receive a further injection of investment as the new pension rules come into force next month,’ he pointed out.
He also added that retirement age buy to let investors could boost the lower end of the property market and the first time buyer property sector could be the greatest recipient of any increase in demand from investors with substantial pension pots.
‘Unfortunately flats and terraced houses with two bedrooms or fewer are coming to the market in smaller numbers than the middle and upper tier sectors, so are the least prepared for an up-surge in demand,’ he explained.
The data suggests that the first time buyer sector seems to be showing the effects of the growing imbalance between supply and demand with prices up 7.6% compared to last year, and the number of properties coming to market in this sector up by a modest 2.6% this month compared to last.
In contrast, the second stepper sector has seen an increase of 5.3% in fresh stock and a 7% year on year price rise, with the top of the ladder sector stock up by 5.4%, and a 4% annual price change.
‘The lower end properties favoured by first time buyers and investors are in short supply in many locations due to increased competition among mortgage lenders, who are also chasing landlords with offers of low rates for lower risk. Some cash rich pension pot buy to let investors will also be tempted by those tax-deductible mortgage rates, creating further upwards price pressure in a market sector that is already outstripping the higher ones,’ said Shipside.
‘While many pension pots may not fund a sufficiently large tax free lump sum to facilitate a property purchase, for some it will provide enough for a mortgage deposit and others may feel it worth paying some income tax now to release more money,’ he pointed out.
For example, someone aged over 55 with £120,000 in their pension pot and £10,000 in an ISA can raise up to £40,000 tax free for a buy to let mortgage deposit, which can be topped up further if required by paying their marginal rate of tax on a larger withdrawal from their pension.
‘When the realities of the possible tax penalties on larger withdrawals are better understood by aspiring new landlords, their appetite for buy to let may diminish and anticipated demand may be less than speculated. It’s a hard one to call,’ added Shipside.
