Home sellers' expection of the price they will be able to obtain when selling their property is lowering, shows the Rightmove House Price Index. Last month new sellers coming to the market reduced the average national asking prices by 1.2% (£2,936), the first fall Rightmove has ever measured in the month of June (previous low: 0.2%, June 2005). The adjustment is belated but in some ways welcome as it makes homes more affordable for buyers, who are being increasingly stretched by rising inflation and mortgage rates.
Miles Shipside, commercial director of Rightmove comments: "In spite of the lowest housing transactions for 30 years, new sellers had been coming to the market asking record prices. It was a mad state of affairs that defied the laws of economics. Thankfully, new sellers are now taking some proactive steps to price more realistically from the outset to attract increasingly hard-pressed buyers. It is essential your property stands out over your competition, especially with a property to buyer ratio of 15 to 1. Sales are still happening, and there is a pent-up demand for the right properties at the right price. The homes that are in special locations, have strong character details or an immaculate finish are still popular if priced realistically. Run-of-the-mill homes that are not much different to others on the market have to stand out as bargain buys, and badly presented homes have to be really cheap."
The widening gap between some sellers' asking price aspirations and what buyers are willing or able to pay is one of the factors behind the illiquid property market and low volumes of transactions. Getting serious about attracting buyers through more realistic pricing now appears to be more firmly on sellers agendas, after months of denial. Most sellers will still benefit from large equity gains. Further reductions in asking prices will be required for properties in over-supply, as buyer affordability is still deteriorating against the wider economic backdrop of the average cost of living outstripping wage rises and the upwards spiral of mortgage rates. The restrictions on mortgage availability give sellers an additional challenge, as the number of readily mortgageable buyers they can target has been severely restricted. Evidence of the challenge facing sellers is research from Rightmove showing the doubling of the ratio of properties for sale to successful buyers. The number of properties for sale has now breached the one million mark, contributing to the ratio of 15 properties for sale for every successful buyer. Last year saw an average of 7:1.
Shipside adds: "Lenders are trying not to lend right now and are just cherry-picking for profit. With approximately half the mortgage funds available, homes have to stand out to attract the half of buyers that can still buy. For most sellers that will mean whatever they thought of asking for their property at the peak of the boom, they need to take at least 10% off. Otherwise, their property will stagnate."
Average unsold stock per estate agency branch continues to rise to new record levels, to 75 homes per branch from 73 in the previous month. Not only is this the highest ever in June, it is the highest figure Rightmove has ever recorded. Against this level of competition and given the difficult economic background and low level of transactions, sellers and estate agents need to 'sell their way out' of this downturn by being very pro-active.
