House prices increased by just 0.2% over the last month, according to Rightmove’s latest survey. But as the property market flattens, the new figures show that asking prices are still increasing – up £20,000 over the last year.
The market, according Rightmove, is adjusting prices in reaction to last month’s rise in interest rates and warns that further increases will do more harm than good. ‘Asking prices are at a virtual standstill,’ said Miles Shipside, its Commercial Director. ‘The market appears to be correcting affordability issues itself and does not need further intervention from the Bank of England.’
Meanwhile, Gordon Brown has hinted at further rate rises in his annual submission to the International Monetary Fund, and experts are forecasting an increase in the cost of borrowing sooner rather than later.
Over the past weeks Rightmove has recorded the fewest number of new instructions since January; a sign that current prices and increasing costs of home ownership are dissuading potential sellers from trading up. According to Rightmove the shortage of stock would normally lead to substantial price rises, even in the traditionally quiet summer months but prices are up by just 0.2%: ‘Sellers trading up have been sheltered from rising prices, as they were already on the property ladder. Now the price gap to the next rung has got even wider, some of those thinking of selling are delaying marketing until their own affordability improves,’ says Mr Shipside.
Rightmove expects prices to increase by 8% in total over the course of 2006, and advises sellers to price competitively and offer less on their new property. ‘The pent up demand is there,’ Mr Shipside explains, ‘but the buoyancy of the economy and consequent lack of forced sales mean that most sellers can afford to wait for buyer affordability to improve rather than be forced to substantially drop their asking prices.’