Warning over 'unrealistic' UK housing market as asking prices rise

Published by Jon Land for 24dash.com in Housing

The asking price of homes rose by 1% during the past month as new sellers failed to price their properties realistically, figures showed today.

The average property for sale in England and Wales now costs £229,691, following the first increase in asking prices during the four weeks to October 11 for five months.

But property website Rightmove warned that despite the recent "financial mayhem", many people were failing to price realistically and were tempted to think that their own home was more desirable than others on the market.

It added that estate agents were also competing for the few homes that were being put up for sale, on the off-chance that they could make a sale and boost their revenues before Christmas.

But despite the lift in asking prices, house prices have still fallen by 4.9% during the year to mid-October, the biggest drop ever recorded by Rightmove.

The traditional autumn bounce in the market, which usually sees prices rise by around 2%, was also more muted than usual.

Miles Shipside, commercial director at Rightmove, said: "Any potential buyer will drive a hard bargain, so the temptation for sellers to price up and negotiate later may seem like a good idea.

"These are not the tactics of sellers in real financial hardship, and it would appear that the economic downturn has yet to become an everyday reality to most people."

But he warned that as unemployment rose, leading to a surge in forced sales, prices would be driven down further.

The level of unsold property on estate agents' books remained historically high during the month at an average of 76, due to the lack of buyer activity and sellers' reluctance to accept a lower price.

However, the group said there did appear to be pent up demand, with "property vultures" circling the market looking for the right deal.

The West Midlands saw the biggest price rise during the month, with the average cost of home there rising by 2.8%, followed by the South East at 2.6%.

But at the other end of the scale, asking prices in Wales fell by a further 3.3%, while those in the North were 1.1% lower.

All regions of England and Wales have seen price falls during the past year, with Wales seeing the biggest drop at 8%, closely followed by the North West at 7.3%.

Mr Shipside said the events of the past few months would have long-term consequences for the housing market, which was unlikely to ever be the same again.

He said lending was likely to remain restricted compared with before the credit crunch, and first-time buyers were likely to continue to need to save larger deposits than previously.

Amateur buy-to-let investors are also likely to find it more difficult to raise the mortgage finance they need in future.

Mr Shipside said: "For those who have been active in the housing market in the last 20 years, or were now hoping to get on the housing ladder following recent price falls, the rules have changed for good.

"When we look back on these turbulent times, I suspect we will not only realise that we came closer to the brink than most imagine, but we will also clearly recognise it as the end of the long period of growth in owner occupation."