House Price Update to 6 July 2011

UK House Prices Situation: Sale prices fall despite sellers’ ambitions

UK House Prices Forecast: House prices will continue to fall in most areas

Sellers Rising Asking Prices Defy Reality

The latest figures from the Land Registry show that house prices fell by an average of 0.4% in May, bringing the yearly change to -2.2%.

Yet property website Rightmove’s most recent house price index finds that sellers are still increasing their asking prices – by an average of 0.6% in June and 1.3% in May.

This can only mean that many have no urgent need to sell and are in a state of denial about the value of their home.

Figures from the Royal Institution of Chartered Surveyors (RICS) show that new buyer enquiries are falling at the same time as new seller instructions are rising. Average unsold stock per estate agency has risen from 69 at the start of 2011 to 78 at present.

Such a combination has two possible outcomes – a stagnant market, with large volumes of unsold property, or falling house prices, as sellers realise that buyers have the upper hand and lower their selling prices.

Rightmove’s forecast is for gains in [asking] prices seen during the first half of the year to ebb away in the second half of 2011, leaving prices only marginally higher than they were at the start of the year. Miles Shipside, Rightmove’s Commercial Director, says that he expects to see “the over-supply of property and under-supply of mortgages reassert themselves and exert downwards price pressure.” This could encourage more buyers to the market, stimulating sales.

One final note: it is worth stressing that the north-south divide continues to make itself felt in the British housing market.

House prices in London and wealthy areas of the south east are performing much more strongly than in the Midlands and north of England, where economic conditions and unemployment are much worse.

However, poorer areas of the south are struggling just as wealthy areas of the north are prospering – as Miles Shipside observes, “earning power and the ability to raise a decent deposit are the deciding factors [in getting a mortgage], rather than your location on a map.“

Read about UK House Price indexes / key statistics that track the ups and downs of house prices

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

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