The latest House Price Index from Rightmove reports that the seasonal trend of falling asking prices during December has been magnified by an unseasonal surge of cheaper than average 2 bedroom or fewer properties coming onto the market in order to avoid their 14th December HIPs deadline. Although this has added some welcome new sellers, it also brings further confusion at a sensitive time for the property market, bringing average national asking prices down by 3.2% (£7,590).
The disproportionate number of cheaper properties coming onto the market has exaggerated the average price fall and Rightmove estimates the 'HIP effect' has added 1.1% to the monthly drop, which would otherwise have been a fall in the region of 2.1%. In London, the fall of 6.8% would have been reduced to around 4.5%. Monthly price falls have occurred nationally in December for the last three years and in 5 out of the last 6 years in London. It is a typically quiet time of year when new sellers tend to be more desperate to sell. And given the traditionally low number of properties coming to the market, a surge in supply of a particular category of home will distort average prices. However, the substantial drops in asking prices are further confirmation of the underlying trend of more sellers readjusting their prices downwards to try and tempt buyers in deteriorating market conditions.
At this time last year, 38% of properties coming to market had two or fewer bedrooms. In the week from 2nd December to 8th December, this increased to 48%, which is a massive increase in the proportion of smaller properties. In London, the corresponding figures were 43% and 50%. This surge in the number of smaller properties coming to market will continue to be reflected in Rightmove's January House Price Index, but by February figure, the 'HIP effect' should have finally worked through the system.
Miles Shipside, Commercial Director of Rightmove comments: "New listings are very low at this time of year, so the artificial wave of 'low-end sellers' has really distorted the average prices of new properties coming onto the market. Whilst 3 months ago we forecast that the final phase of HIPs would drop average prices this month, a substantial element of the fall reflects genuinely tough market conditions, and many sellers who have listed this month
have priced below the market to try and sell. It is wrong, however, to speculate that prices will continue to fall based on one month's statistics from a quiet December."
Rightmove's House Price Index is compiled from the asking prices of properties coming onto the market through 12,500 estate agency branches.
