The price of properties coming to market this month has reached yet another all-time high for the fourth consecutive month, with the average price increasing by +£7,400 (2.1%) in the last month alone, to now sit at £367,501 – over £55,000 higher than pre-pandemic prices, according to property website Rightmove’s latest House Price Index.
This compares to a rise of just £6,218 in asking prices in the two years before the pandemic and illustrates how the frenzied market activity has led to two-year price growth in cash terms never before witnessed in over twenty years of tracking prices.
This fourth consecutive price record comes alongside a fourth successive interest rate rise, but this rate rise and other household economic concerns do not appear to have dented the motivation and urgency to move that are felt by many, though there are signs that the market is starting to ease.
The number of buyers contacting estate agents is 14% down on the stamp-duty-fuelled market of this time last year but is up by 31% on the more comparable market of 2019.
The number of properties available to buy is 55% down on the levels seen in 2019, meaning that supply and demand look likely to remain out of kilter for at least the rest of 2022. The number of sales agreed is up by 12% in the year to date compared to 2019 even with restricted choice, though is down 17% compared to the exceptional market of the same period last year.
These numbers suggest that a lack of homes for sale rather than a lack of desire from buyers is what is dictating the pace of the market. New stock is most urgently needed in the mid-market sector of two- and three-bedroom semi-detached homes, which are seeing the most competition from buyers.
Tim Bannister, Rightmove’s Director of Property Science, says:“People may be wondering why the housing market is seemingly running in the opposite direction to the wider economy at the moment. What the data is showing us right now is that those who have the ability to do so are prioritising their home and moving, and the imbalance between supply and demand is supporting rising prices. Though demand is softening from the heady levels we saw this time last year, the number of buyers enquiring is still significantly higher than during the last ‘normal’ market of 2019, while the number of homes for them to choose from remains more constrained. We anticipate that the effects of the increased cost of living and rising interest rates will filter through to the market later in the year, and a combination of more supply of homes and people weighing up what they can afford will help to moderate the market.”
One big question hanging over the market is affordability for first-time buyers.
While average monthly mortgage payments (£901) are currently above average monthly rental payments (£887), typical first-time buyer mortgages are 11% higher than a decade ago, and rents are 40% more expensive.
In fact, the property website says rental prices are currently rising at the fastest rate ever recorded.
Analysis by Rightmove has also shown that a single person on the average salary would have to have a 34% deposit (£74,402) to afford to buy a typical starter home. This figure is 112% up from the 25% deposit (£35,053) required a decade ago.
Two people on average salaries buying a home together would be able to afford a first-time buyer home if they have saved a 10% deposit, Rightmove says, although the size of that deposit has rocketed 56% from £14,269 to £22,312 over the last 10 years.
“This new analysis shows how it has become increasingly difficult for an average first-time buyer to afford a home on their own. The historic average mortgage payments for a first home provide some good context to the current backdrop of rising interest rates and help explain why so many people take out fixed-rate mortgages. As interest rates are predicted to rise further during the course of 2022, many buyers will be looking to lock in mortgage deals now before further rate rises. With so many variables affecting house prices and affordability, the market is extremely difficult to predict, and those looking to buy will be prioritising their own needs and what they can afford rather than waiting to try and time the market.” - Tim Bannister.
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