First-time buyers are encouraged by the drop in house prices according to the UKs leading property website, Rightmove.
Its September House Price Index reveals that average asking prices fell for the third consecutive month by 0.4% (845) and, overall, by 3,200 over past three months. The average property now costs 195,407.
Housing affordability has improved due to average wage inflation- currently running at 4.2% including bonuses exceeding house price inflation, which dropped from 2.1% to 1.6% this month.
At the beginning of this year, sales volumes were at their lowest for 10 years. Sellers and estate agents have since adopted more realistic pricing.
Shirking the usual summer malaise, buyers have responded in kind. August sales levels outstripped each of the two previous months.
Miles Shipside, commercial director of Rightmove.co.uk, says: Prices rose strongly from the turn of the millennium until the summer of 2004. Sales volumes then collapsed. Dwindling numbers of first time buyers, followed by the exit of buy-to-let investors, meant that the market had to find a new level of pricing at which buyers would return in numbers. Sellers are finally being more realistic with their asking prices, which, combined with cheaper mortgages and rising wages, means that more buyers can now afford to enter the market. There is some fear amongst first time buyers that they will be in competition with Self Invested Personal Pensions from next April, pricing them out of the market again.
Shipside adds: As long as interest rates dont shoot up, this lower house price level should be sustainable.
A surge in oil prices, increasing inflationary pressure, forcing interest rates to go back up, could yet threaten this recovery in affordability.