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Market continues in same direction – down, down, down...
Latest analysis by Rightmove shows that 70 per cent of properties that were newly marketed in the first six months of 2011 are still up for sale, a sobering reflection of current market conditions.
This is hardly surprising, says Rightmove, given that lenders are still only approving around half the number of mortgages they were before the credit crunch happened. As a consequence, sellers have to have sufficient equity to be able to price aggressively to attract scarce buyers and still raise a large enough deposit to fund their next move.
This is likely to contribute to new seller numbers remaining subdued. The current weekly run rate of new listings is 27,062, which is 12 per cent lower than the 30,877 recorded in July 2010. Sellers with sufficient equity are at a considerable advantage in being able, if they are willing, to undercut the competition and then be in a strong position to be able to negotiate a similar reduction if they are purchasing again. They also benefit by being able to put down enough of a deposit to get the most attractive mortgage rates.
Miles Shipside of Rightmove says, “Many equity-poor aspiring sellers will be trapped in their current homes, either unable to come to market or stuck on the market and unable to reduce to a price that will attract buyer interest. Those that are equity-rich have an opportunity to increase their chances of success by launching to the market at a price below their over-priced and stale competition.”
The current level of retail price inflation is reducing property prices in real terms, which will eventually help frustrated would-be sellers who are currently unwilling or unable to price to sell. Shipside summarises, “While property has a good long-term record as a hedge against inflation, in the short term property prices have become significantly cheaper in real terms as the cost of living has gone up, while the cost of housing has stood still or gone backwards.”