November has seen a fall of 2.6% (-£6,407) in the asking prices of properties coming to market, according to Rightmove.
However, this is the least severe November fall since 2009 and still leaves prices 2% (+£4,617) ahead of where they were this time last year, the highest annual rate of increase achieved in November for five years.
Rightmove said that London continues to buck the national trend, but, even with the large lift in London prices removed, the rest of the country is broadly stable (+0.2%) year-on-year. This, alongside some favourable signs from other lead indicators, suggests a somewhat brighter outlook for 2013 as we enter the traditional winter slowdown, the firm said.
“Though the market remains patchy and national statistics are given a gloss by a buoyant London market, there are a number of positive trends that justify cautious optimism as the market enters its’ winter recess,” said Miles Shipside, director and housing market analyst at Rightmove.
“Outside the capital, agents report prices are broadly flat in many parts of the country compared to a year ago. This stability may indicate a sounder springboard for 2013 as the wait goes on for a sustainable recovery in transaction numbers.”
Rightmove stressed that November’s decrease of 2.6% should be put into the context of November falls of -3.2% and -3.1% in 2010 and 2011 respectively. With asking prices of property coming to market up by 2% compared to a year ago, the annual rate of increase is the highest at this time of year since the 7.9% recorded in November 2007.
Even with London’s 8.8% annual increase removed from the dataset the rest of the country still shows marginal year-on-year growth (+0.2%).
Shipside said: “There’s a two-speed market, with sellers in the capital seeing near double-digit price growth in a year whilst the average for everywhere else remains broadly flat. However, digging beneath some of the headline regional figures unearths evidence of a second two-speed scenario in many local markets, with those that are willing or able to price under the competition selling and moving on, while those that can’t or won’t stay put. Sellers who are lacking momentum in their attempts to attract buyer attention so far this year will be hoping the market steps up a gear in 2013.”
He added: “Terraces and flats have increased in price year-on-year more than any other property type. With bottom-end activity a key driver for the rest of the market, this is an indicator of increased activity amongst investors and first-time buyers.
“In addition, our survey found that 78% of 2013’s intending first-time buyers stated that they have a 10% or greater deposit lined up, suggesting they have adjusted to the new market norms of higher equity requirements. While their numbers remain muted, after years of patiently saving they will be hopeful that Funding for Lending, a ￼government backed scheme to improve mortgage availability, helps to catapult them into home- ownership next year.”
While average stock for sale has fallen from 75 properties per estate agency branch a year ago to 71, competition among sellers for mortgage-ready or cash buyers looks set to remain fierce in many markets, Rightmove said. One option for sellers is to prepare their property for sale by spending a few thousand pounds, offering prospective buyers a ‘ready to move into, little to do’ experience. With many buyers having put their cash towards raising a deposit, they have little to spend on improvements when they move in.
However, Rightmove research found that only 17% of sellers stated they were definitely willing or able to spend on a ‘make-over’ even if they stood to gain financially by achieving a considerably higher price. As well as the ‘hassle factor’ of home-improvements, this also reflects many sellers’ lack of access to funds to carry out what would be financially astute improvements. It also highlights one of the legacies of the downturn with many sellers suffering from shrinking equity pots, limiting their ability to raise relatively small lump sums.
Sellers who bought in more buoyant times and are now looking to trade up are the hardest hit. About a fifth (22%) of buyers who bought in the last five years state that their property is currently worth less than they paid for it, rising to 49% among those that bought in the ‘price peak’ year of 2007.
Shipside added: “Diminished or negative equity is a Catch-22 for sellers, as it potentially deters them from making the investment to increase the value and sale-ability of their property and maximise their gains or cut their losses. Agents report that properties that are closest to ‘showhome condition’ and ready to move into are selling more easily and achieving the highest prices, as buyers have little spare cash for improvements. Those sellers that can attempt a mini-makeover as a tactic in 2013 should consider putting some DIY products on their Christmas list.”