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House prices run out of steam
Average asking prices fell by 1.6% (£3,540) last month, bringing the annual rate of increase back into single digits at 9%. The rise in prices this year to record levels has been caused by a miniboom in the south of England. This drop in asking prices of 167,399 newly marketed properties gives the earliest indicator that prices are past their peak for 2006. Seasonal factors also play a part in the largest average fall since November 2004, as summer sellers have to trim their price expectations with many buyers on holiday. With the average asking price now standing at £214,040, the record average asking price of £217,580 set in July is unlikely to be surpassed again this year, especially in view of the changed interest rate climate.
Miles Shipside, Commercial Director of Rightmove comments: “Prices have passed their peak for 2006. The record price levels seen so far this year were driven by the south of the country. With that market cooling, and the signals from the Bank of England that interest rates may move up again, sellers may have to reduce their price expectations.
This welcome dose of reality is good news for buyers, especially in the south of England, where many have been priced further out of the market by the strong growth during the first half of the year”
Stretched buyer affordability, exacerbated by the recent unexpected rise in interest rates, means the rate of increase seen so far this year is no longer sustainable. These factors, together with the traditional slowdown in August, have brought more realism to the market. Underlying demand for property remains strong and should mean that volumes of sales remain healthy during the autumn market. However, increasing costs of home ownership and moving up the property ladder, added to rising energy bills, have already stretched affordability to levels where volumes of sales could begin to suffer.
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