Average asking prices in September have fallen by 2.6% (£6,298) since last month, as Home Information Packs (HIPs) distorted the market, with the average price drop exacerbated by a 41% slump in properties with four or more bedrooms, according to this month's Rightmove House Price Index. This has been the lowest September for new sellers since 2004 and average stocks per estate agent remain static as low listings are matched by low buyer demand.
Those predicting that the introduction of Home Information Packs would cause market disruption have some early indicators of seller behaviour. The average number of 4+ bedroom properties coming to the market per month in 2007 between January and July was 40,000. In the month following the 1st August HIP deadline, this fell by 41% to 23,400. It is showing no signs of an upturn, with last week being the lowest week of the year so far with just 4,159 4+ bedroom properties being added to the Rightmove site. This compares with the weekly average of circa 10,000.
Miles Shipside, Commercial Director of Rightmove comments: "Whilst there was a surge of '4 bedders' coming onto the market for just one week at the end of July, there has been a much greater dearth of them in the four weeks since. If this happens with the remainder of the phased introduction of HIPs, the concern will be that impulse sellers are being put off by the additional costs and hassle of a pack. Whilst it should all settle down with time, it will take longer as sellers are now facing the challenges of a cooling market and the highest interest rates for 6 years".
The lower number of 4+ bedroom properties coming onto the market has also depress average national asking prices by 2.6% (£6,298). Whilst this is the largest monthly fall measured since January 2002, it is largely a statistical anomaly caused by HIPs being phased in by number of bedrooms, resulting in fewer higher-priced 4+ bedroom properties coming to the market in the last month. It has resulted in the annual rate of increase falling from 12.8% to 9.6%. Distortion of normal market forces will continue into next year due to HIPs implementation and phasing according to bedroom numbers. It is however clear that the more prosperous end of the market has been holding fire in substantial volumes in the month after commissioning a HIP became a legal requirement. The primary reason for phasing implementation was that there were not enough accredited Energy Performance Assessors. It may turn out that a more fundamental problem is that sellers have become accustomed to testing their property on the market with no financial cost. The additional commitments that are potentially faced with just commissioning a HIP appear to be deterring some impulse sellers at present, but at least they can market the property immediately once it has been commissioned. This right to be able to market a property straight away is up for review at the end of the year.
Miles adds: "Sellers like to be able to market their property immediately. Introducing
further hurdles and potential delays to them coming onto the market means these reforms could actually be perceived as hardening the process of moving home".
Aside from the market distortions of HIPs, there is additional evidence of the housing
market slowdown being especially tough through the summer months. The 121,000
properties coming onto the market this month is the lowest figure for September since 2004. The result is that numbers of 1 and 2 bedrooms newly listed properties were 24% down on the average for the year, with 3 bedroom properties down 15%. Sellers looking to trade up are faced with high moving costs due to current levels of mortgage rates and property prices. Of those that are coming to the market, only sellers of flats have held their asking prices steady. To attract scarce summer buyers, sellers of terraces have trimmed their asking prices by 1.7%, semi detached by 2%, whilst detached property dropped by 4.2%. This figure is distorted by the lack of higher priced 4 bedroom homes. In spite of the lowest numbers of properties coming onto the market since the beginning of 2007, average stocks per estate agency branch remained static. This indicates a correspondingly depressed number of sales.
