The October Edition of the Rightmove House Price Index reports that asking prices have hit a new national record of £218,954, up from £214,566 in September, with prices now 11.5% higher than a year ago. This is based on analysis of 133,089 asking prices - around 75% of the UK market; the properties were put on sale by estate agents from 10th September to 7th October 2006 and advertised on Rightmove.co.uk.
* Asking prices hit new national record of £218,954, up from £214,566 in September
* Highest annual rate so far in 2006 - prices now 11.5% higher than a year ago
* Double digit annual increases in all southern regions while north lags behind
* Shortage of available properties continues to drive the market
Average asking prices now stand at a new national record of £218,954, passing the previous high of £217,580 set in July 2006. The annual rate of increase has jumped back into double digits, reaching the highest rate seen this year at 11.5%. This represents a year on year rise of £22,606. Overall rises are very much driven by the strength of the market in the south and underpinned by the resilience of prices in the north. The drop in asking prices over the summer months proved to be another false dawn for aspiring first time buyers and those struggling to trade up. The combination of a seasonal lull and a rise in interest rates caused a temporary pause. The underlying shortage of suitable property in the right locations and the benign economic conditions create an environment in which asking prices are likely to continue their upward trend for the foreseeable future.
Rightmove anticipates that this will be most marked in the southern regions, where the lowest rate of annual increase is 14.8% in the south-east. Asking prices in the south-west have gone up by 15.3%, with East Anglia now 16.6% higher than a year ago. Average London asking prices are now £53,000 higher than 12 months ago, representing a 19% rise. With wage inflation under 5%, and average house price inflation over 10%, most first time buyers are falling ever further behind. Pent up demand for home ownership remains strong, supported by economic stability, ready availability of finance, and the ever present desire to get on the housing ladder. Unfortunately, a lack of flexibility on the supply side means this is feeding into increases in property prices, rather than increased building of new homes.
Miles Shipside, Commercial Director at Rightmove explains: "We have never had a sustained low inflation, low interest rate economy combined with widespread home ownership. These unique conditions help push prices higher and higher. However, supply of houses coming onto the market is dropping as prices increase, because fewer home owners can afford to trade up. This adds to the shortage of suitable property for sale, resulting in further upward price pressure where demand outstrips supply. Where affordability becomes so stretched that buyers start to hold off, then sellers will have to price more realistically. The result is a record level of asking prices but on thinner volumes. This is sustainable unless there is a serious economic downturn. The stable economic environment, fostered by low interest rates and low inflation, renders this unlikely. Fiscal policy and interest rate management increasingly recognise the importance of housing market confidence to the economy. This minimises the likelihood of high unemployment or high interest rates, which would lead to forced sales and consequent downward pressure on prices. The lower level of newly marketed properties and ongoing demand for housing mean estate agents' stock is selling more quickly. Average time on the market fell from 79 to 77 days over the last month. Property remains in favour as a sound long term investment, resulting in first time buyers still being keen to get onto the property ladder. There is no respite on the horizon for potential first time buyers. Renting for longer, buying your first home later, possibly via shared equity or an interest only mortgage, is the reality. Reform of stamp duty for genuine first time buyers in the Chancellor's forthcoming autumn statement would be a real boost for them".
