Rightmove has warned vendors of the perils of over-pricing, as it reports that the pace of asking price growth has dwindled to its lowest annual rate since April 2013, to leave the average UK asking price just 2.3% above the same point last year.
The portal’s latest monthly index indicates that asking prices rose by a “surprisingly modest” 2.0% in the last month – that’s the smallest price rise at this time of year since February 2009, and well below the February average over the last seven years, of +5%. Demand, however, seems to be keeping strong – with the website recording record numbers of visitors (visits are 3% on last January’s buy-to-let-boosted period), although properties are sticking around for longer.
Such a marketplace makes it even more risky than normal for vendors looking for punchy valuations, says Rightmove, with slow valuation inflation meaning that ambitiously-priced properties stand out for longer.
75% of estate agents surveyed by the portal reported that we’re in price-sensitive times, with buyers reluctant to enquire if property is priced just a few percent too high. Only one in four agents (25%) said interest was still generated if prices were more than 5% too high, while Rightmove has worked out that sellers are 40% more likely to sell with that agent if the property is priced right when it first come to market.
Despite the slower momentum of price increases, however, the number of properties that estate agents are selling is holding up well in comparison to a year ago. Sales agreed are down by just 3.1% in January, with the bottom rung of the ladder being the drag with a fall of 8.9%. This sector, comprised of properties with two bedrooms or fewer, also saw fewer new listings, down by 10.3% compared to the overall new supply drop of 6.1%.
London out-performed in January, with the average price of property coming to market jumping by 2.6%. Inner London continued to rally a bit, with a +5.2% in asking prices as owners of more expensive properties skew the average rise by deciding to come to market after the Christmas sojourn; Outer London, meanwhile, languished with a 0.1% drop in average asking prices.
Putting seasonal volatility aside, the year-on-year figures show a major change in the capital’s property fortunes with the largest annual fall (-0.4%) since April 2011.
London’s most expensive borough, Kensington & Chelsea, highlights some of the Inner London challenges and re-adjustment at the very top end of the market with a 14.6% annual fall, and over £360,000 chopped off average new seller asking prices.
Miles Shipside, Rightmove director and housing market analyst: “While the prices of goods in shops are rising at a faster rate, the pace of price rises in property coming to the market is slowing. They’re still 2.3% higher than a year ago, but perhaps we’re approaching the territory where many buyers are unable or unwilling to pay what sellers are asking, given the negative combination of rises in the cost of living, tighter lending criteria, and a dose of Brexit uncertainty. The housing market has had a long sprint since April 2013 when the annual rate was last below this level, so it’s not surprising that upwards price pressure is running on tired legs with average prices today being 23% or nearly £60,000 higher than they were then. This surge in the cost of home-ownership highlights some of the issues referred to in the government’s recent White Paper on fixing the broken housing market.
“With Rightmove recording over 131 million visits in January, some three million higher than a year ago, demand for housing is at an all-time high for this time of year. Home-hunters are busy searching online for the right home at the right price. While seller pricing power appears to be on the wane overall, the numbers of deals done is very robust, scarcely lower than during last year’s tax-saving rush, although understandably quieter in the investor sector of two beds or fewer and in parts of London.
“The majority of the market is price sensitive with most agents we surveyed reporting that possible buyers are reluctant to enquire about a property just a few percent too high in price. With the annual rate of price increase now at 2.3% a property that is over-priced by more than 5% will have to wait more than two years for the market to catch up with it. Some sellers may have thought there is no price to pay by starting high and reducing the asking price later. However, our extensive tracking of properties that have found a buyer shows that your property should substantially out-perform the level of interest in similar properties in your local area during the first three weeks of marketing to minimise the risk of being left on the shelf. Over-pricing loses you that vital initial interest and impetus, and buyers often have reservations about a property that has not sold as quickly as others or has had a price reduction.”