Sixth price record but market cooling from boil to simmer
Rightmove has recently reported a sixth consecutive price record for July, but the housing platform says the temperature of the housing market is moving from boil to simmer.
The average price of property coming to market has risen by 0.4% (+£1,354) to £369,968.
Rightmove cites a continuing desire to move and low numbers of homes for sale as the main driving further price growth even though personal finances are becoming increasingly stretched.
Buyer demand continues to exceed historically normal levels and is now 26% higher than at the same time in 2019, although down 7% on June 2021.
But the good news, is that Rightmove says there are signs the “seriously depleted stock situation” is improving.
The number of sellers is actually up by 13% compared with this time last year, but the number of available homes for sale is still 40% down on where it was in 2019.
Rightmove has revisited its 2022 price forecast, because of the slow rate of stock recovery and 7% annual growth now expected by the end of the year across Great Britain, up from the 5% forecast at the start of the year.
Co-director at Samuel Wood, Russell Griffin, said: “There is currently a significant shortfall from more normal stock levels which is what has underpinned prices this year. There are simply not enough homes coming to market to correct the balance between supply and demand. We do keep saying that it is a record-breaking time to sell your home as it could achieve an unprecedented figure. But those looking to sell to move yourself are also affected by the higher purchase prices, so something of a stalemate occurs.”
The slow rate of stock recovery has led to Rightmove revising its 2022 price forecast, with 7% annual growth now expected by the end of the year across Great Britain, up from our 5% forecast at the start of the year.
Tim Bannister Rightmove’s Director of Property Science, said: “Having more new sellers this month is a win-win for the market, as these sellers will likely achieve good prices for their homes given the sixth asking price record in a row that we’ve now seen, which may help to explain the increase in new stock coming to market over the last year.
“For those looking to buy, it means more choice, and a slight easing in competition against other buyers while the market is still moving very quickly. In the current fast-changing economic climate, those looking to buy who find a suitable home they can afford, may choose to act now rather than wait. While more choice is welcome news, the number of homes available remains well below the more normal levels of 2019 and is unable to satisfy the continued high demand that we’re seeing.
Though a softening in demand is moving the market from a boil to a simmer, it remains 26% up on 2019. With such an imbalance remaining between supply and demand, prices look underpinned, and we would therefore only expect typical smaller seasonal month-on-month falls, rather than more significant price falls in the second half of the year.”
Demand is likely to return to more normal levels in the second half of the year due to the rising cost of living and affordability concerns, however the prospect of further interest rate rises may drive some to act now to lock in a longer fixed-term mortgage rate.
This is even more likely because the gap between interest rates for shorter- and longer-term mortgages has been closing in recent years, and they are now virtually the same.
For example, the average interest rate for a 75% loan-to-value mortgage is now 2.9% for either a two-year or five-year fixed deal. Historically lenders offered a lower rate on a two-year fix, with a difference of as much as 1% between the two deals over the past five years.
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