Money News
Latest data (June) from property website, Rightmove, shows the number of homes for sale now outnumbering buyers by a ratio of 15:1. That's more than double the rate 12 months ago and reflects the mortgage famine that now appears to be hitting home, literally.
Meanwhile, house prices fell by 1.2% in June, giving a year on year increase of just 0.1%. This contrasts sharply with the 1.2% monthly gain in May, giving a year on year increase of 2.2%. The average asking price now stands at £239,564 (£242,500).
Miles Shipside, commercial director of Rightmove says that in spite of the lowest level of 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," he notes.
He adds that homes in special locations, and that have strong character details or an immaculate finish, are still popular if priced realistically. Run-of-the mill homes that aren't 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. And of course most sellers will still benefit from large equity gains.
However, 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.
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."
23 June 2008 © Moneyextra.com
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