Rightmove: Prices fall as market fractures
Property asking prices dipped £5,000 in the month to mid-August as the summer lull hit and homebuyers split into the haves and have-nots, says Rightmove.
Summer lull: Property asking prices fell in August, says Rightmove
The property listing website reported a 2.2% fall in average asking prices during the month, but saw a record number of visitors to the site hunting for new homes.
Although interest in buying a new home is strong, Rightmove says that revival will not come until the majority of buyers at the mercy of mortgage lenders' tough selection policies see prospects improve.
- House price tables: Round-up
Tough conditions have left the property market increasingly fractured, according to Rightmove, which says it has identified two main types of buyer.
Top of the pile are the Creditworthy, who can take advantage of historically low interest rates, with substantial 25%-plus deposits, good credit histories and larger income multiples.
This highest level of buyers tend to be chasing property in London and the South East, says Rightmove, with good quality smaller homes and larger family houses in popualr areas most likely to benefit from their spending power.
Sat below them is the wider category of the Marginals, who need to take on mortgages of more than 75% of a potential new home's value and need a squeaky clean credit history and to borrow less compared to their salaries.
A further group, the Minimalists, are locked out of the property market. This group of more modest means were welcomed by mortgage lenders before the credit crunch hit, borrowed heavily to fund home purchases and now find themselves in negative equity or at risk of losing their homes.
They are now 'effectively excluded' from the property market.
Rightmove's Miles Shipside says the group vital to the property market's short term health will be the Marginals.
He said: 'The activity of the Marginals group is the one to watch, as they include the vital first-time buyers whose shift to creditworthy status will herald the return to greater transaction volumes and enable more sustainable house price growth.
'Price growth is also required to enable owner-occupier Marginals to re-build their equity and come into play as 'trader uppers' and future sellers.'
Rightmove said August's fall in prices almost directly mirrored last year's dip over the summer holiday month. Its monthly survey has now shown five months of rising asking prices and three months of falling asking prices in 2009.
The average property's asking price is £222,762, down £7, 054 on a year ago, but £9,192 higher than the low of £213,570 seen in January.
Rightmove claimed last month that potential buyers had missed the best bargain homes and that with hindsight the bottom of the market had come last winter.
Regional breakdown: How has your area performed? Click to enlarge
The North West was one of only three regions to see a price rise during the month, with asking prices jumping by 1.4%, followed by the East Midlands at 1.2% and the North at 0.8%.
East Anglia saw the biggest monthly dip in asking prices with these dropping by 8.3%, although the group cautioned that the figure was likely to have been exaggerated by summer selling patterns.
The West Midlands and Greater London both recorded drops of 3.8% during the month.
Trends beneath fluctuating asking prices are the real story
This is Money assistant editor Simon Lambert says: Rightmove's monthly report is often considered easy to dismiss: after all it's only asking prices and anyone can ask what they want for their home but they won't get it.
However, while the bouncing around of asking prices on a monthly basis on Rightmove's measure is prone to fluctuation and too much should not be read into them, the trends the UK's biggest property website identifies are worth looking at.
Last month, it boldly claimed buyers may have missed the best bargains, with last winter marking the low in terms of activity. That dismisses the potential for a wave of forced sellers as the power of base rate cuts wears off, but mortgage and transaction figures do seem to point to the activity having reached a nadir in late 2008 / early 2009.
This month's interesting trends come firstly in the form of a record month of traffic for the website, with more traffic than even during the boom years.
Some of this is down to shifts in the volume of advertising, the biggest player tends to gain in a slump as agents focus their activity, but it is remarkable that during a steep property slump, deep recession and global period of economic difficulty, such a huge wave of interest from potential homebuyers remains.
Secondly, there is Rightmove's observations on the fractured market. This split between the haves and the have nots has been developing for some time and much of the current mini-revival in the property market in some areas is thanks to the haves mobilising.
While these haves - dubbed the Creditworthy - may be fuelling market confidence at the moment, it is the have nots - the Marginals - who will are the important category.
Mortgage rates for the Marginals - those with deposits of 25% or less are approaching 6% or above and not much lower now with the base rate at 0.5%, than they were a year ago when the base rate stood at 5%. In many cases they are higher.
By historic measures 6% is relatively cheap money, but it was rates rising to these levels, combined with high property prices, that contributed to the property slowdown. Prices may have fallen 20% from the peak to increase affordability, but combine stubbornly high mortgage rates with rising unemployment, negative equity, wage freezes, and much tougher lending criteria from lenders and a return to a fully functioning property market looks unlikely in the near term.
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