Rightmove’s house price index for April reveals average asking prices are well below wage inflation and buyers with big deposits are getting more for their money.
But the website’s figures also highlight the challenges faced by the housing market and reinforce the need for the Bank of England’s anticipated measures to inject liquidity into the market.
The annual rate of increase in asking prices has dropped substantially from 5% to 1.3% and represents the lowest year-on-year increase since July 2005, when rises stalled at 0.2%.
Estate agencies also report a rise in unsold stock, with the average number of unsold properties per firm rising from 67 to 70. Rightmove adds it is taking longer to sell properties, with the average time increasing from 82 days to 85 in March.
Miles Shipside, commercial director of Rightmove, says: “Buyers who have saved through the winter will find there are deals to be had. It’s a buyers’ market but only if they are buying for cash or can put down good deposits.
“Our advice to borrowers is to line up mortgages in advance because it is harder and more costly to borrow higher percentages. Once they are arranged they must be prepared to negotiate hard. It could be a good time to trade up in the market. Similarly, sellers would be smart to look for buyers with short chains as there’s more chance of longer chains falling apart because mortgages are more difficult to obtain.”
Rightmove says that without rising unemployment and significant levels of forced sales, the most likely outcome of prevailing market conditions is market stagnation as opposed to substantial price falls.
But it says an ongoing lack of liquidity could trigger a price crash if an increasing number of sellers are forced to seek mortgage-free cash buyers or those with large deposits. Such buyers will be able to demand larger discounts.
Shipside says: “Neither a crash nor the current stagnation is a palatable or politically acceptable outcome. Unless the anticipated steps to be taken by the Bank of England are effective, potential buyers will face lower asking prices.
“In spite of challenging market conditions, sales have not ground to a halt and deals are still being done. The market has the potential to recover confidence if the right conditions are put in place. The slowdown is a natural reaction to overheated prices, although it has been magnified by the credit crunch. This correction is in danger of being taken to unreasonable extremes if the lack of mortgage liquidity continues.”
He adds: “Buyers and sellers need more positive news on interest rates and mortgage liquidity, so we urge lenders, the BoE and the government to be more energetic in making it.”