The continuing ability of buyers to pay record prices is one of the conundrums of the current property market. In the absence of a surge in the supply of new build, the need for housing continues to drive demand.
The national average asking price of 132,123 properties put on the market in the last 4 weeks rose by 0.9% (£1,799) to a new record of £203,399. Consequently, increasing numbers of both first time buyers and those moving up the housing ladder find themselves caught in a pincer movement between rising prices and the stamp duty trap. As a result, homemovers will follow the Chancellors forthcoming budget statement with great interest.
Analysis of Rightmove's database of 571,000 properties currently for sale (representing circa 70% of the whole market) illustrates the decreasing number of properties priced below the 1% stamp duty threshold of £120,000. In many parts of England and Wales, the tax is now a mandatory cost of home ownership, as it is not a realistic option for purchasers to avoid it by being more selective in their criteria.
* Only 16% of properties advertised on rightmove.co.uk are priced below the £120,000 stamp duty threshold
* First time buyers fare best in the North region, where 36% of property is priced under the £120,000 trigger
* The option of buying a property that does not attract stamp duty recedes in the south, with the South-West at 11%, the South-East at 8%, and Greater London at less than 2%.
Miles Shipside, Commercial Director of Rightmove comments "You'd have thought record prices and most buyers being caught by the stamp duty trap would have slowed the market. However, the need to put a roof over your head and the lack of other options mean buyers are faced with no other realistic choice than to stretch themselves further if they can".
Affordability constraints will reach a level where buyers' ability to pay more for their home will be limited by the level of their wage increases. This is especially true for first time buyers who have traditionally formed circa 40% of all buyers. While the market is less dependent on them than before, the threshold would have to be set at £166,000 for 40% of property for sale across England and Wales to be excluded all together from the burden of stamp duty. At a regional level the threshold would be highest in Greater London (£238,000) and lowest in the North (£128,000).
There are signs, however, that the pace of increase in asking prices is being kept in check by affordability constraints. The 0.9% increase this month is down sharply from the 2.7% last month, resulting in a modest increase in the annual rate from 4% to 4.3%. In addition, the 6 month downward trend of average properties for sale per estate agency branch has come to a halt as we see the expected seasonal increase in properties coming to the market. It has increased from 61 to 63, indicating that at the national level buyer and seller activity are balancing out. Time on the market continues to fall, but again at a reduced pace, dropping from 81 days to 75.
Miles Shipside adds "After several months of confidence building activity, it could be that we are entering a period of stability. We expect prices to fluctuate within a fairly narrow range according to local supply and demand, with property having to be accurately priced or it will not sell. The exception will be the hotter areas of demand, especially in the south where there has been a disproportionate increase in disposable income".
