Rightmove reports asking prices are slowing down

Property website Rightmove.co.uk reports that the mini-boom in property prices that it saw in June has come to an end in July.

The monthly increase in asking prices in the UK is up by just 0.3% in July, compared to a rise of 0.8% in June. This means that the average property asking price in July is £240,001, up from £239,317 last month. It brings the annual rise in asking prices down to 10.3% from 13.2% up to June.

Rightmove.co.uk is the UK’s largest property web site, advertising around 80% of all homes for sale via estate agents across the UK. Attracting more than 25 million visits from home movers each month, users view in excess of 450 million pages. Each month Rightmove uses asking price data of up to 200,000 properties coming onto the market to produce this House Price Index - the largest, most accurate and up-to-date monthly index. The index itself stands at 195.3 from a starting point of 100 in January 2002.

It seems that interest rate rises may be having an effect at last. The third rate rise this year in early July must have an influence on asking prices which went up by the lowest amount so far in 2007. This is the lowest monthly growth since December 2006 which saw a negative 0.3% growth, and before that September with a 0.2% growth. Nationally asking prices were up by only £684 on average with sellers’ expectations being reduced. The accumulation of three interest rate rises in 2007 have dampened prices so much that the last three months have seen a quarter of the rate of increase of the previous three months. The first quarter of 2007 saw asking prices rise from £222,859 to £236,490 – a 6.1% increase. The second quarter saw a rise of only 1.5%.

This means that the annual rate of house price inflation has dropped sharply from 13.2% to 10.3%, the lowest yearly rate since it stood at 9.8% in September 2006.

“This is further evidence that the ‘mini boom’ is coming to an end. As long as employment remains buoyant, prices are likely to remain broadly at these levels. However, depending on local supply and demand, sellers are going to have to duck and weave with their asking prices, especially if there is another rise in interest rates. This may be less likely now as there do seem to be further ‘indicators suggesting a softening in the housing market’ as referred to in the MPC’s latest minutes,” commented Commercial Director of Rightmove, Miles Shipside.

The traditional North-South divide has become more of a “London-rest of the country” divide, as the London market has shown few signs of cooling off. The capital’s annual rate of housing inflation is almost double that of all other regions. Closest to London’s 21.7% annual increase is Yorkshire and Humberside at 11.4%. Those regions closest to London geographically cannot compete. The South East had a rate of 10% and East Anglia’s was 10.4%.

Miles Shipside said: “Shortages of supply will remain more acute in the capital, as suitable building land is harder to come by and demand will continue to grow as the City strives to become the financial capital of the world. The consequent upwards pressure on prices can be absorbed by highly paid City workers, but it exacerbates the existing problems for key workers and first time buyers in London.”

Prime Minister Gordon Brown has pledged to provide more affordable housing in the country. This will be a mighty challenge – terraced houses and flats have shown the greatest rate of increase in the last 12 months thanks to the demand form new households. Thus, affordability has actually got worse for cheaper properties which would be bought by those needing the most affordable properties. Terraces have gone up over 30% faster than semi detached and detached property in the last year, at an annual rate of increase of 11.8%. Flats have increased at a staggering annual rate double that of house price inflation for semi-detached and detached properties, with asking prices 16.5% higher than a year ago.

“The number of households is growing, but new households are faced with limited choice in the ‘affordable’ sector that Gordon Brown has promised to create to help first time buyers get onto the property ladder. The result is increasing price pressure on the cheapest property types of terraces and flats, especially in the London market where more jobs are created to support the capital’s buoyant economy. Building more affordable housing is the right solution, but the Prime minister’s revised target of 40,000 extra homes per year starting in 2016 is too little too late,” explained Miles Shipside.

Rightmove measured 186,597 asking prices – about 80% of the UK market. The properties were put on sale by estate agents from 10th June to 14th July 2007 and advertised on Rightmove.co.uk.