October has seen a new all time high for the price of listing coming onto the market in the UK at £296,549, according to the latest index figures to be published.
However the month on month rise of 0.6% was relatively modest for the time of year and it the lowest October increase since 2010, the data from Rightmove shows.
Year on year prices are up 5.6% and the new record asking prices is being fuelled by high demand for first-time buyer listings, with prices in this sector up 4.9% on last month and 9.6% over the past 12 months, the firm’s report says.
It also points to a ‘vicious circle’ as high tenant demand leads buy to let investors to go head to head with first time buyers and many letting agents report ‘same day’ rentals and little or no listing to rent.
At the same time the number of first time buyer listings, usually regarded as two bedrooms or fewer, coming to market is down by 8% on same period a year ago, exacerbated by first time sellers struggling with second step price gap.
‘There are signs of a slowing pace of price rises in some sectors of the market, with the overall October rise the lowest we’ve recorded at this time of year for five years. We still have another national average record however, as prices continue their upward trend,’ said Miles Shipside, Rightmove director and housing market analyst.
‘This is mainly being fuelled by the heady price rises of typical first time buyer homes. A near 10% price surge in this category in the last year proves that despite tighter lending criteria in last year’s Mortgage Market Review, some first time buyers can still afford the higher prices being asked for by sellers in this sector,’ he explained.
‘It’s also symptomatic of a shortage of listings coming to market with two bedrooms or fewer, combined with demand from both first-time buyers and landlords investing in reaction to the huge rental demand for smaller listings,’ he added.
Letting agents report extraordinary demand from tenants in many parts of the country, with new or existing households looking to the rental sector to fulfil their need for quick and flexible housing arrangements. A growing number of people like the transience of renting, without the complications, commitments and costs of buying and then selling, the report says.
With inadequate supply from housing associations and the public sector, private landlords are one of the few active providers of smaller homes for rent. However, when this need is combined with first time buyer demand, boosted by the return of low deposit mortgages and lenders competing to reduce their rates, it creates a vicious circle due to the limited supply of suitable listings for sale in this most active sector.
‘With local authorities, housing associations and developers no longer satisfying the country’s housing needs, those in particular looking to rent or buy smaller homes must hope for government action or large scale institutional investment,’ said Shipside.
‘Tenant demand is such that many letting agents are reporting viewings and tenancy applications on the same day as marketing listings. In some cases they’ve nothing left to rent until tenants move out or a new influx of investor landlords gives some short lived respite to tenants in waiting,’ he pointed.
‘Both investor landlords and first time buyers looking to buy smaller homes are finding them in short supply. As they’re typically owned by potential first time sellers, the price gap and costs of moving to the second step on the housing ladder deter them from coming to market. Competition is most fierce in this sector, with first time buyers and buy to let investors going head to head for the same listings,’ he added.
One agent experiencing rental demand is Danielle Cosway, business manager from Clear Property in Exeter. The firm cannot get enough lettings stock to satisfy the demand. ‘We are struggling to keep listings on the market for more than 24 hours. While there are government schemes to help people get on the listing ladder not everyone wants that kind of commitment and so prefer to find a quality home to rent instead,’ she said.
‘The fact that there’s more money readily available for first time investors has made the first time buyer sector extremely buoyant recently, and obviously with this comes competition between first time buyers and investors. But first time buyers shouldn’t be disheartened because as long as they have enough of a deposit to afford the home they want, they’re not really any different to a non-cash investor, and they just need to push the fact that they really love the place and have no chain,’ she added.
According to Michael Hayward, director of Castle Estates Letting Agency in Nottingham, the rental market has been ridiculously busy over the past few months. ‘Before, we were organising around five to 10 viewings a week on our whole stock of rental listings, and now we’re seeing five viewings for each listing, with many being let within a few days,’ he said.
‘We’ve also had requests for advice from first time landlords looking to buy first time -buyer type listings, some looking to use their pension pots, and it’s clear there’s not much to choose from. With such high tenant demand those looking to buy a smaller listing need to be much more proactive,’ he explained.
Jo-Anne Neighbour, head of residential sales at Savills in Islington, said demand is exceeding supply at the lower end of the market in the area, with anything not over priced selling very quickly.
‘Buyers are very clued up on what represents value and can easily spot an asking price that is out of line, with the most interest being generated in the £500,000 to £750,000 bracket,’ she added.
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Source: Property News Spain