UK House Prices Situation: Bullish asking prices mask falling sale prices

UK House Prices Forecast: Negative annual growth in 2008

Rightmove - Sellers Need To Accept "New Reality"

New properties being placed on the market are being priced remarkably close to the peak boom prices achieved in summer 2007, according to new figures from Rightmove.

This has led to a 0.8% increase in asking prices in March - an increase that is in inverse proportion to the downwards trend for sale prices.

Rightmove's Commercial Director, Miles Shipside, said that "Most sellers coming to the market seem to be ignoring the increased competition from other unsold properties and the challenge buyers now face in obtaining a mortgage."

Shipside went on to say that prices often overshoot in a boom before adjusting to new market conditions, and he believed that was what was happening now. "Deals are being put together but tend to be at around 10% below peak boom prices. The challenge to sellers is to get smart and accept this new reality. The best price sellers can achieve has fallen - though they won’t lose out if they are then planning on buying as well."

Nationwide Records Falling Mortgaged Sale Prices

Nationwide also published their latest house price index this week, which found that the average asking price for a home in England and Wales fell by 0.6% in March - bringing the rolling annual increase down to just 1.1%; considerably below inflation.

Leaving aside the fact that an increase below inflation is effectively a fall in real terms, the contrast between Nationwide's falling figures and Rightmove's rising figures reflects an uncomfortable truth for many sellers. Asking prices are being negotiated down, and real selling prices are falling in the current market.

Commenting on the results, Nationwide's Chief Economist Fionnuala Earley said that "If prices were to fall in line with consumers’ expectations, they would still be higher than two years ago. A moderate fall in prices at this stage should not be unwelcome and should help to ensure greater stability in the market going forward."

Read our take on the Credit Crisis the effect on UK House Prices and Mortgages. A Special Report

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