Housing market confidence on shakey ground
The January survey revealed that confidence was slipping amongst both sellers and buyers. 80.5% expected house prices to rise by 5.0% over the coming year, down from 83.9% expecting prices to rise by 6.3% in December last year.
Warren Bright, Chief Executive of propertyfinder.com said:
The impact of the August and November rate hikes wasn't felt immediately. Recent reports from RICS and Halifax suggested some of the heat may already have begun to dissipate. The latest move by the MPC will further increase the pressure on mortgage borrowers.
With inflation at an 11 year high of 3.0%, it is now a virtual certainty that interest rates will rise again at least once this year, making it even more difficult for first time buyers to get on to the property ladder.
With this increasing demand for rented accommodation from aspiring first time buyers, our research has also revealed a rise in the number of homes being purchased as a buy-to-let investment.
Seller v Buyer confidence
Entering 2007 sellers remained in a fairly strong position - with demand from buyers sufficiently high that they hardly needed to compromise on price. Propertyfinder's research conducted prior to the MPC's latest rate rise this month showed that sellers were only willing to accept, on average, a discount of 3.8% on the asking price (compared to 4.7% in December 2006).
Furthermore, the research showed many home buyers makeing offers above the asking price to increase their chances of securing a home. For the first time since October sellers were more optimistic than buyers (89.6% and 87.3% respectively), expecting house prices to rise by 6.2% over the next 12 months compared to 5.9% expected from buyers. Warren Bright said:
Recently, sellers have clearly had the upper hand, with limited stock of property on the market relative to the number of buyers out there. With confidence starting to wane and interest rates now on the up, it is likely that we will see a shift in the balance of power from sellers to buyers as demand for property begins to cool.
The financial markets are now suggesting that another interest rate increase is a done deal, with some reports suggesting that rates may go as high as 6.0%. We had expected the housing and mortgage market to slow naturally in 2007 but a more abrupt adjustment is now a real risk. It's time for a pause so the market can digest the cumulative effect of this succession of rate increases.
