New analysis from Rightmove shows the biggest gap between demand and supply is in the first-time buyer sector:
- Number of enquiries per property for two bedrooms or fewer is 24% higher than for larger properties of three bedrooms or more
- Challenge for government, planners and developers is how best to address this specific demand
- Price of property coming to market sees marginal increase for the second consecutive month to a new record high, up 0.1% (+£191) to £294,542
- Sharp drop in new seller numbers emphasises supply crisis and shortage of people trading up:
- Number of new sellers down 10.6% on same period in 2014
- High June demand with Rightmove visits and enquiries to agents both up 22% on last year
The price of property coming to market has hit a new record high for the second consecutive month, albeit only a small 0.1% (+£191) increase on the month before. The average new seller asking price is now £294,542, though given the sharp drop in the number of properties put up for sale it is somewhat surprising that the increase is so modest.
Likely influences are the onset of the seasonal summer slowdown, and buyers’ constraints in affording record prices. The latter underlines the need for more new build homes – affordable, of the right type and in the right locations – and emphasises the importance of the recent government announcement on speeding up residential planning permissions aimed at boosting supply. The shortage is most acute for smaller homes with two bedrooms or fewer, where Rightmove sees the biggest demand in excess of supply.
Miles Shipside, Rightmove director and housing market analyst comments:
“Another month, and another record high in the price of property coming to market. While the monthly increase is very modest, the same period a year ago saw a monthly fall of 0.6% which is more the norm given the onset of the summer holiday season.
However, given the widely acknowledged supply crisis and a sharp drop in new seller numbers this month compared to this time last year, it is somewhat surprising that the rate of increase has slowed to such an extent. Recent government announcements including relaxing residential planning requirements on brownfield land are an important part of the mix in improving affordability if they follow through to cheaper land prices.”
Demand remains high, with both visits to the Rightmove website and enquiries to estate agents up by 22% in June compared to the same period a year ago. In contrast the number of properties coming to market is running at a weekly run-rate 10.6% below the same period in 2014. The biggest drop-off in fresh supply is in the typical first-time buyer sector with two bedrooms or fewer, the sector where demand was already at its highest compared to available properties. The shortage of suitable property for sale highlights the need for an urgent and marked increase in the overall housing stock to help keep pace with the growth in household formation. With signs of buyers hitting their affordability ceilings, a substantial increase in suitable new build supply would help to alleviate upwards price pressure, although years of under investment will take years to rectify.
“Creating an environment where homes are more affordable requires long-term solutions. As prices increase, more and more buyers are reaching the upper limits of what they can afford or are allowed to borrow under newly restrictive mortgage lending criteria.
Those assessing whether to sell and trade up are faced with a double whammy of curbs on their borrowing power and bigger price jumps to the next rung of the ladder. Improving affordability requires the creation of more homes of the right type and in the right place, resulting in increased churn and more pricing competition. The challenge is to identify what is in demand and in short supply and build more of it.”