Money News
Latest figures from Rightmove - the property information provider - show annual asking price inflation dropping by 2% (to 11.5%) in February, the sharpest fall for 18 months. Indeed the 0.9% monthly increase is just half the traditional February rise and the lowest for 5 years.
Rightmove's latest figures show 143,000 newly marketed properties coming on to the market. However, whilst estate agents continue to report good levels of sales activity, data shows average property for sale per estate agency branch at a 3 year low for this time of year. This, in conjunction with a speeding up of stock turnover since the New Year, has led to a fall in time on the market, from 88 to 78 days.
The above combination of factors would usually generate a rise in prices similar to previous years. But the contrary statistics point to the shock January interest rate rise knocking sellers' traditional New Year optimism.
Miles Shipside, Commercial Director of Rightmove makes the point that the shock tactic of one unexpected rate rise early in the year appears to have had the desired effect. February price rises are normally two to three times higher than measured this month.
"With three interest rate rises in the last six months and the looming threat of another, it looks like we have finally reached the point where the market is highly interest rate sensitive.
"We are at a crossroads, and the path taken by those in charge of interest rate policy will dictate the direction of the housing market in 2007," he notes.
Price gains continue to be consistent in the south of the country, though the pace appears to be slowing. This southern 'mini boom' has been largely responsible for driving the national average rises back into double digit percentage figures, an unsustainable level for increasing numbers of home movers.
Shipside adds that a period of stability and lower growth is required for the longer term health and sustainability of the housing market. Annual increases of around 5% p.a. give a balance to the market where new buyers are encouraged and rewarded by an appreciating asset; but not at a rate that restricts a desirable level of ongoing transactions.
"Buyer demand is still good, but appears to be resisting overpricing apart from the southern hotspots. With prices still at record levels and upwards interest rate speculation, sellers are showing signs of realising that buyer resources have a limit.
"It will be interesting to see if that discipline holds during the spring without a further rate rise, or conversely how both buyers and sellers react to another rise in the coming months," he says.
19 February 2007 © Moneyextra.com
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