Where have all the sellers gone?
26 May 2009
Opinion: Tracy Kellett, BDI Home Finders
Most of the latest Rics survey, published last week, was devoted to the continued rise in prospective demand in the housing market.
The Royal Institution of Chartered Surveyors said that new buyer inquiries rose for the sixth month in a row and were at their best level since August 1999. Despite everything, people still have faith in housing.
Some of this interest is being translated into hard sales, though at an average of 10.6 per surveyor over the past three months, these remain very low. There is always a lag between rising buyer inquiries and transactions, but there are a couple of reasons why so many potential buyers are being frustrated.
Mortgage
One, of course, is mortgage availability: although there are signs of a modest thaw, getting a mortgage is problematic for many home buyers, particularly first-timers without a big deposit.
The other is supply. This housing recession is proving very different from its predecessors. The expected flood of properties onto the market has not happened, at least so far. Some who would normally have sold are choosing to rent out instead, and have become accidental landlords. Others are hanging on for the return of more normal conditions.
Demand
The result is that even as demand is rising, the number of properties coming on to the market is falling. A net 22% of surveyors saw a drop in new instructions to sell last month, up from 4% in March. Rics believes changes to Home Information Pack (HIP) rules may have exaggerated the fall; the requirement to pay for the pack means people may not price-test the market in a way they used to when it cost them nothing.
Stock
For many buyers, this is a tough time. There are “stale” properties on the market that nobody wants to buy, but the available stock is not being refreshed. Some sellers may also have exaggerated expectations of what they can get.
Home.co.uk says asking prices have risen by 1.1% in the past month.
We discuss ways that smart buyers can get round the reluctant seller problem. In time, the more they believe demand is genuinely improving, the more the market will free up, on both the supply and demand side. For a while, however, the housing market will continue to be rather frustrating.
House builders
The UK's house builders are starting to move again. Redrow said last week that it was beginning to commission homes, after almost a year of mothballing its sites. David Arnold, its finance director, said that many first-time buyers were now being funded by their parents. The National Home Building Council says that last month saw the first rise in applications to build new homes in almost 18 months.
The price of the average property in England and Wales fell to £162,601 last month — the lowest since July 2004, according to a poll of polls by Chesterton Humberts estate agency. But it says the rate of decline is slowing. The north west saw the largest year-on-year decline, 19.1%; the shallowest drop, of 10.5%, was in Scotland. Prices in London are 16.4% below their February 2008 peak, making the average house price in the capital £295,832.
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