Record High Prices as Sellers Respond to Improving Market | Fraser & Co Estate Agents

Prices hit a record high as new sellers respond to improving market

In a delayed reaction to the higher-than-anticipated level of market activity since the year's beginning, the average price of property coming to the market rises by 1.8% (+£6,647) this month to reach a new record of £372,894:
•    This 1.8% monthly gain, which is much greater than the historical average May growth of 1.0%, is the largest increase of the year thus far.
•    The current agreed-upon sales figures are only 3% behind the previous, more regular pre-pandemic market of 2019.
•    The average difference between the final asking price and the agreed-upon sale price has remained constant at 3.1%, in keeping with typical market levels, showing homebuyers' confidence in the market's prospects.

While there are symptoms of over-optimism in the top-of-the-ladder sector as some discretionary purchasers hold off, the rising pricing confidence appears to be more justified in the lower and intermediate market sectors:
•    Buyer demand is 1% lower than in 2019 for top-of-the-ladder residences, 3% higher than in 2019 for second-stepper properties, and 6% higher than in 2019 for first-time buyers.

Despite yet another hike in the Bank of England base rate, average mortgage rates are staying the same:
•    Mortgage rates for a typical 5-year fixed, 15% down payment are currently 4.56%, down from 5.89% in October.

Average new seller asking prices jump by 1.8% (+£6,647) this month, compared with the historical average May rise of 1.0%.  This is a new record high of £372,894 as sellers respond with increased pricing confidence to a market that is defying start-of-the-year expectations. Earlier in the spring season we were seeing some caution on asking prices from new sellers despite positive signs for activity levels, as home-movers continued to navigate the fallout from the mini-Budget. Now, with buyer demand 3% higher than in 2019 and sales agreed just 3% behind 2019’s levels, this positive activity has belatedly filtered through to new sellers’ asking prices. Consumer affordability is still stretched in the contemporary multi-speed, hyper-local market, which is still price-sensitive.  Although there is a greater reason for increasing seller price confidence in the first-time buyer and second-stepper house sectors, there are some indications of overconfidence in the top-of-the-ladder sector.

Tim Bannister Rightmove’s Director of Property Science:

“This month’s strong jump in new seller asking prices looks like a belated reaction and a sign of increasing confidence from sellers, as we’d usually see such a big monthly increase earlier in the spring season. One reason for this increased confidence may be that the gloomy start-of-the-year predictions for the market are looking increasingly unlikely. What is much more likely is that the market will continue to transition to a more normal activity level this year following the exceptional activity of the pandemic years.  Steadying mortgage rates and a generally more positive outlook for the economy are also contributing to more seller confidence, though there are likely to be more twists and turns to come. The market is still very price-sensitive and it is important that new sellers do not damage their prospects of a sale by overpricing initially and reducing later, with agents reporting that it’s the realistically-priced new instructions that are selling best.”

Agent’s Views

“The market is very price sensitive, and it is the most accurately priced homes that are creating the most interest and attracting buyers. Properties that have been on the market for a few months may have gone stale, and their asking price is out of line with more realistically priced new instructions, where many sellers are motivated to sell and in tune with the current market. Starting with too high an asking price, thinking you can always reduce the price later can be damaging to the prospects of a sale. We’re now seeing a much more normal market following the pandemic-inspired frenzy, with good buyer activity for right-priced property, with many of our new instructions finding a buyer within a week. Movers are beginning to understand the new market dynamics and are not as deterred by changes to interest rates as they perhaps were a few months ago.”

Source: RightMove