Rightmove reports that Home Information Packs (HIPs) are continuing to distort the housing market, leading to wild fluctuations in new supply and average asking prices, with this month's 2.7% rise reversing the 2.6% fall seen last month. The general price slowdown continues as the 3-month on 3-month rate of house price increase falls from 1.5% to 0.5%, the lowest quarterly rise since the winter of 2005. The average asking price has increased from £235,176 in September to £241,642 in October.
Average asking prices in the Rightmove October index rose by 2.7% (£6,466), reversing last month's 2.6% fall. These sharp fluctuations are largely due to the distorting effect of HIPs on the market. This month's figure includes a surge of 3 bedroom properties coming onto the market to beat the HIPs deadline of 10th September. At the same time we have seen the partial return of 4+ bedroom properties following the slump after the HIP requirement was introduced for these properties on 1st August. This means that a higher proportion of properties coming to the market have more bedrooms and tend to be of higher value, thus pushing up the average asking price.
Looking at regional price variations, the distorting effect of the introduction of HIPs has been concentrated in the south where a 3 bedroom property is above the average price, especially in London where we have seen the largest regional increase. In addition there are fewer 3 bedroom properties in the south so when a substantial number suddenly come to market, the effect on average prices is more marked. When 1 and 2 bedroom properties hit their own HIP deadline, we expect to see a price fall of up to 5% in a month, driven by the same distorting effect, which will then be largely reversed in the following month.
In the week around the 10 September deadline, the number of 3 bedroom properties coming onto the market was 24,570, 65% higher than the average for the previous four weeks. This is larger than the 42% surge for 4 bedroom and larger properties in August, suggesting that sellers and estate agents are becoming more aware of HIPs and their associated deadlines. The fact that new listings of 2 bedrooms and fewer remain stable confirms the external influence HIPs are having on property supply.
Miles Shipside, Commercial Director of Rightmove comments: "Legislative tinkering involving future cut off dates has a history of unbalancing markets. In a stable market this presents fewer dangers, but in today's more sensitive financial environment the effects can be more exaggerated. It is very unfortunate timing that HIPs and their side-effects are straddling a period of record house prices, the highest interest rates for 6 years and a tightening in mortgage lending criteria. These abnormal external factors make it very hard for policy makers to accurately read the market and assess the effects of wider global influences".
