Average national asking prices reach a new all time high of £222,859. The 0.5% monthly increase is further evidence of demand continuing to outstrip supply in many parts of the country, with record asking prices for newly marketed properties in 7 out of 10 regions, as reported in the January edition of the Rightmove House Price Index.
One of the key factors that influence price movements in the year ahead is the supply of properties for sale as the market enters the New Year. The average property stock for sale per estate agency branch currently stands at 52. This is the lowest figure for this time of year for three years. It is also the lowest monthly figure since April 2004. Miles Shipside, Commercial Director of Rightmove comments: "Stock levels per estate agent at the start of the year have not been this low for three years, and are 18% lower than at this time last year. Where there are shortages of property, prices will keep increasing and properties will keep selling, in spite of the latest interest rate rise".
Despite the three interest rate rises in the last six months, there is evidence that newly formed households are a major contributor to rising prices. The average asking prices of flats and terraces, the type of properties sought by first time buyers, each rose by over £4,000 during the last 3 months, compared to detached properties falling by nearly £5,000. New households often have an urgent requirement for a home, and whilst three interest rate rises will cause financial pain, many are still finding the means to get on the property ladder. As with previous rate rises, the Bank of England cannot address the long term demand and supply imbalance, and indeed monetary policy is a particularly blunt tool in this respect. Property prices will continue their upward trend, and fuel long term inflationary pressures, until we see the fruits of positive Government action to improve the supply, and consequently the affordability, of housing.
Miles Shipside comments: "The reason house prices are defying the gravity of a six year high in interest rates is because the number of new households is growing by 50,000 a year, more than the supply of new build. Slowing property prices by raising interest rates several times in quick succession is not only incredibly painful for existing and potential homeowners' mortgage payments, it's a high risk strategy for the economy given the possibility of rates going too high."
While demand remains strong in London and the south, in the less buoyant areas where available property already exceeds demand, the increased costs of home ownership will result in sellers having to compete on price. Those sellers who refuse to trim their price expectations will not attract the attentions of buyers whose affordability has further diminished following the latest rise in the cost of borrowing.
