The average price of property coming to market saw a sixth consecutive record this month, rising by 0.4% to £369,968, according to the latest Rightmove house price index.
The research shows that a continuing desire to move and low numbers of homes for sale are driving further price growth even at a time when personal finances are becoming increasingly stretched.
Buyer demand continues to exceed historically normal levels and is now 26% higher than at the same time in 2019, although down 7% on June 2021. There are signs of the seriously depleted stock situation improving, with the number of sellers up by 13% compared with this time last year, but the number of available homes for sale is still 40% down on where it was in 2019.
This significant shortfall from more normal stock levels will help to underpin prices this year, as there are simply not enough homes coming to market to correct the balance between supply and demand, Rightmove says.
As a result, Rightmove has revised its 2022 forecast of 5% growth to 7%, with record low stock volumes struggling to meet buyer’s demand.
Tim Bannister Rightmove’s Director of Property Science, said: “Having more new sellers this month is a win-win for the market, as these sellers will likely achieve good prices for their homes given the sixth asking price record in a row that we’ve now seen, which may help to explain the increase in new stock coming to market over the last year. For those looking to buy, it means more choice, and a slight easing in competition against other buyers while the market is still moving very quickly. In the current fast-changing economic climate, those looking to buy who find a suitable home they can afford, may choose to act now rather than wait. While more choice is welcome news, the number of homes available remains well below the more normal levels of 2019 and is unable to satisfy the continued high demand that we’re seeing. Though a softening in demand is moving the market from a boil to a simmer, it remains 26% up on 2019. With such an imbalance remaining between supply and demand, prices look underpinned, and we would therefore only expect typical smaller seasonal month-on-month falls, rather than more significant price falls in the second half of the year. This has led to us revising our annual price growth prediction for the end of the year from 5% growth to 7%, although this would still mark a slowing from the 9.3% seen this month.”
Due to higher property prices and rising interest rates, first-time buyers are facing a 20 per cent rise in mortgage payments.
Rightmove estimates that a typical first-time buyer’s repayments will be £163 higher than they would have been at the start of the year.
Demand is likely to return to more normal levels in the second half of the year due to the rising cost of living and affordability concerns, however the prospect of further interest rate rises may drive some to act now to lock in a longer fixed-term mortgage rate.
This is even more likely because the gap between interest rates for shorter- and longer-term mortgages has been closing in recent years, and they are now virtually the same. For example, the average interest rate for a 75% loan-to-value mortgage is now 2.9% for either a two-year or five-year fixed deal. Historically lenders offered a lower rate on a two-year fix, with a difference of as much as 1% between the two deals over the past five years.
Tim Bannister continues:“The challenges presented by rising interest rates and the cost of living will no doubt have an effect throughout the second half of the year, as some people reconsider what they can afford. However, there is also anticipation among would-be home-movers that personal finances may become even more stretched in the coming months, with further interest rate rises expected and the energy price cap jumping again in October. Given the political and economic uncertainty at the moment, those who want to move this year, particularly first-time buyers, may seek some financial certainty by locking in longer fixed-rate mortgage terms now before their monthly outgoings increase again.”
If you are considering a move in 2022, or have any queries regarding the current housing market, please contact one of our property experts today.
