With seven out of ten homes which have gone on the market this year still waiting to find a buyer, sellers are at last beginning to cut asking prices, says the latest market survey from Rightmove.
The property website reckons July brought the first monthly fall in property prices recorded in 2011, with a drop in the average asking price of around £3,800 to £236,600.
Rightmove director Miles Shipside says: “Sellers in the second half of 2011 need to do something different to promote their property and increase their chances of catching elusive buyers.”
While equity-poor sellers have limited scope to cut prices further, there is a great opportunity for the equity-rich to cut prices, the survey suggests.
The number of new sellers was down 12 per cent on July 2010, as many owners were unable to find the deposit required to fund their next move
To compile its survey, Rightmove, which attracts more than 40 million visits each month, measured 108,249 asking prices, around 90 per cent of the UK market. The properties were listed by agents between June 12 and July 9.
Rightmove says the fall of 1.6 per cent (£3,797) for the 108,249 properties marketed within the last month must be set against a gain of 8.1 per cent over the first half of the year.
Shipside adds: “Summer sellers are more nervous about their selling prospects than the early birds who asked ever higher prices during the first six months of this year.
“Early sellers in 2011 had a chance of worming their way into the more active spring market, whereas those coming to market now at the onset of the holiday season have to price more aggressively as many buyers have already gone to ground.”
Rightmove says this month is seeing the largest July fall for three years, since the 1.8 per cent recorded in 2008.
“Sellers at this time of year traditionally show more pricing restraint than those in the first six months of the year, and we expect further falls over the next few months as buyer momentum ebbs away due to a combination of seasonal factors and a continuing lack of both mortgage finance and buyer confidence,” says Shipside.
Early findings from Rightmove’s next Consumer Confidence Survey (July 25) show another fall in housing market confidence.
This muted buyer demand has resulted in average unsold stock per estate agency branch being the highest ever recorded by Rightmove at this time of year, currently standing at 78 properties.
Shipside adds: “With high unsold stock levels and deteriorating buyer sentiment, the proposition that sellers and their agents market to potential buyers has to be enticing, in terms of both pricing and quality of presentation.”
Rightmove is “hardly surprised” that 70 per cent of the homes newly marketed in the first six months of 2011 are still unsold, because lenders are only approving around half the number of mortgages they were before the credit crunch.
But the limited funding means sellers need enough equity to be able to price aggressively to attract buyers and have enough left over when a sale goes through to fund their next purchase.
This is likely to contribute to new seller numbers remaining subdued.
Shipside said: “Many equity-poor aspiring sellers will be trapped in their current homes, either unable to come to market or stuck on the market and unable to reduce to a price that attracts buyer interest.
“The equity-rich have an opportunity to increase their chances of success by going on sale at prices below their over-priced and stale competition.”
The current level of retail price inflation is reducing property prices in real terms, which will eventually help frustrated would-be sellers currently unwilling or unable to price to sell.
The Retail Price Index has outstripped property asking prices by 14 per cent over the past four years, improving buyer affordability but undermining the perception of bricks and mortar as a hedge against inflation.
Shipside summarised: “While property has a good long-term record as a hedge against inflation, in the short term property prices have become significantly cheaper in real terms as the cost of living has gone up, while the cost of housing has stood still or gone backwards.”
Rightmove points out that sellers usually know in the first week if they have much hope of finding a buyer.
Its report says: “The first week of marketing creates double the interest of any subsequent week. It is therefore vital to set your initial price at the right level to take advantage of the impact made by a fresh property.
“If a property has gone stale, it is necessary to formulate an effective re-launch to recover the situation.”