Housing market running out of steam?0

Latest housing market data (to August 12th) from property website Rightmove shows that average asking prices fell by 1.6% (£3,540) last month, bringing the annual rate of increase back into single digits at 9%.

The rise in prices this year to record levels has been caused by a miniboom in the south of England. But the latest drop in asking prices gives the earliest indicator that prices are past their peak for this year.

Seasonal factors are also playing a part in what amounts to the largest average fall since November 2004, as summer sellers have had to trim their price expectations with many buyers on holiday. With the average asking price now standing at £214,040, the record average asking price of £217,580 set in July is unlikely to be surpassed again this year, especially in view of the changed interest rate climate.

Miles Shipside, Commercial Director of Rightmove makes the point that with prices in the South of England cooling, coupled with signals from the Bank of England that interest rates may move up again, sellers may have to reduce their price expectations.

"This welcome dose of reality is good news for buyers, especially in the south of England, where many have been priced further out of the market by the strong growth during the first half of the year," he says.

He adds that whilst underlying demand for property remains strong and should mean that volumes of sales remain healthy during the autumn market, increasing costs associated with home ownership and moving up the property ladder, added to rising energy bills, have already stretched affordability to levels where volumes of sales could begin to suffer.

The seasonal slowdown was further evidenced this month by average time of a property on the market lengthening from 78 days to 81, and average unsold property stocks up from 64 per agent to 65. Longer times to sell and greater competition from other sellers are key factors in persuading sellers to market their properties at more competitive prices.

21 August 2006 © Moneyextra.com

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