The average asking price of newly marketed properties in the UK increased by 1.5% or £4,503 this month as strong demand from home movers in the first two months of the year created strong upwards price pressure.
Year on year asking prices increased by 2.1%, taking the average to £304,504 in March compared with £300,001 in February, according to the figures from the latest asking price index from property portal Rightmove.
The data also shows that values hit a new record in four out of 11 regions and for first time and second step buyers have hit all-time price highs of £189,840 and £272,031 respectively.
The Rightmove report says that the rise in asking prices is being exacerbated by a dip in supply with 5% fewer properties coming to market compared to the same period a year ago and buyers springing into action looking to benefit from possible stamp duty savings or beat potential interest rate rises later in the year.
‘Many buyers entering the traditionally busy spring market this year face paying more than ever for their target property, and having a more limited choice. High demand and limited supply in parts of the country mean that the average price of newly marketed property is at its highest ever level in four out of 11 regions,’ said Miles Shipside, Rightmove director and housing market analyst.
‘There is also upwards price pressure in the lower and middle market sectors with both first-time-buyer and second-stepper properties at new national record price highs. The first two months of 2018 saw Rightmove traffic at its highest ever levels, and this demand appears to be now feeding through to fuel the substantial £4,503 jump in average new seller asking prices this month,’ he added.
The index report reveals that the 1.5% increase this month is the largest seen at this time of year since 2007. However, with January and February price rises having been somewhat subdued this year, there may be an element of catch-up supplementing this month’s 1.5% figure.
Over the first quarter of 2018 the price of property coming to market is up by 3%. This is a stronger performance than the first quarter of 2017 when it rose by 1.9%, but weaker than the 3.6% rise in 2016 which was inflated by the rush to beat the stamp duty deadline on second homes.
‘It remains to be seen if this month’s 11 year price rise high for March is a catch-up anomaly after two more subdued price rise months, or an early sign of price pressure building up a real head of steam as we enter the spring market,’ Shipside explained.
‘Either way, sellers need to be mindful of increasingly stretched buyer affordability and the more they increase prices the more buyers will hit their ceiling on the amount they are able to save for a deposit and borrow for a mortgage,’ he added.
‘There does, however, still seem to be potential price headroom in parts of the country, especially in some of the regions in the north, and in the more mass market sectors. But sooner or later higher prices tend to mean fewer people can afford to move, and that is one of the factors keeping the annual rate of increase subdued at 2.1%,’ he pointed out.
The average asking hit all-time highs in both the East and West Midlands, and also in Wales and the North West. From a property type perspective, it has also hit new record highs in the lower and middle sectors of the market nationally.
First time buyer properties, typically two bedrooms or fewer, have hit an average of £189,840, some 0.5% higher than their previous high seen in June 2017. Second stepper properties, usually three or four bedrooms, but excluding four bedroom detached homes, are now coming to the market at an average price of £272,031, some 0.9% dearer than their previous high recorded in October 2017.
Price rises are in part being driven by a decrease in supply as the market enters a traditionally busy phase. Rightmove measured 112,693 properties coming to market in the last four weeks, down by 5.2% on the same period a year ago. Some of this drop will be due to the heavy snow delaying some agents and sellers from bringing properties to market.
‘As the market enters a period of seasonally higher demand, there is a heady mix of a busy time of year, pent-up demand, and shortage of suitable property supply in parts of the UK. Upwards price pressure is also being driven by savings in stamp duty for the vast majority of first time buyers, keen to purchase before those savings are swallowed up by price rises,’ Shipside said.
‘Ironically a sense of urgency to buy is also present from the speculation that another interest rate rise from the Bank of England is on the cards soon. Buyers who apply for a mortgage before interest rates rise should be able to borrow more cheaply,’ he concluded.
According to Nick Leeming, chairman of Jackson-Stops, some sellers will have spotted this as an opportunity to push the limits of what a property is worth, which is likely why there has been an uplift in average asking prices. ‘We must view these asking prices with caution however until we are able to see how transaction rates pan out over the summer,’ he said.
‘It will be interesting to see whether deals are agreed at these higher levels, as just because sellers are asking for more money it doesn’t mean buyers will be willing to part with it,’ he added.