Mon, 24 Sep 07
The findings of this month’s Rightmove House Price Index have given HIP critics yet more ammunition...
Those predicting the introduction of Home Information Packs (HIPs) would cause market confusion and disruption have some early indicators of seller behaviour in this month’s Rightmove House Price Index. Measuring around 90% of property advertised through estate agents in England and Wales, the Rightmove report is well placed to measure volumes of property coming onto the market and the number of bedrooms they possess.
The average number of 4+ bedroom properties coming to the market per month in 2007 between January and July was 40,000, Rightmove reports. In the month following the August 1st HIP deadline, however, this fell to 23,400 - a slump of 41%.
The trend is showing no signs of an upturn, with last week being the lowest week of the year so far with just 4,159 4+ bedroom properties being added to the Rightmove site. This compares with the weekly average of around 10,000 properties 4+ bedroom properties being added.
Dearth of properties
Miles Shipside, Commercial Director of Rightmove comments: Whilst there was a surge of ‘4 bedders’ coming onto the market for just one week at the end of July, there has been a much greater dearth of them in the four weeks since.
If this happens with the remainder of the phased introduction of HIPs, the concern will be that impulse sellers are being put off by the additional costs and hassle of a pack. Whilst it should all settle down with time, it will
take longer as sellers are now facing the challenges of a cooling market and the highest interest rates for 6 years.
The lower number of 4+ bedroom properties coming onto the market has also depressed average national asking prices by 2.6% (£6,298). Whilst this is the largest monthly fall measured since January 2002, Rightmove say this is largely a statistical anomaly caused by HIPs being phased in by number of bedrooms, resulting in fewer higher-priced 4+ bedroom properties coming to the market in the last month.
This has resulted in the annual rate of increase falling from 12.8% to 9.6%. Distortion of normal market forces will continue into next year due to HIPs implementation and phasing according to bedroom numbers, Rightmove warns.
An alternative explanation?
Aside from the market distortions of HIPs, there is additional evidence of the housing market slowdown being especially tough through the summer months. The 121,000 properties coming onto the market this month is the lowest figure for September since 2004, Rightmove reports.
The result is that numbers of 1 and 2 bedrooms newly listed properties were 24% down on the average for the year, with 3 bedroom properties down 15%. Sellers looking to trade up are faced with high moving costs due to current levels of mortgage rates and property prices.
Of those that are coming to the market, only sellers of flats have held their asking prices steady, Rightmove reports. To attract scarce summer buyers, sellers of terraces have trimmed their asking prices by 1.7%, semi detached by 2%, whilst detached property dropped by 4.2%.
This figure is distorted by the lack of higher priced 4 bedroom homes. In spite of the lowest numbers of properties coming onto the market since the beginning of 2007, average stocks per estate agency branch remained static. This indicates a correspondingly depressed number of sales.
Miles adds: There is no flood of sellers to the market looking to bail out quickly because of financial distress. It appears to be quite the opposite with potential summer sellers choosing a watching brief as uncertainty reigns over HIPs, interest rates and the global financial markets. We saw a similar decline in the first quarter of 2003 due to uncertainty about Iraq, but this was quickly reversed in the second quarter when the situation became clearer.
Mike Ockenden, Director General, Association of Home Information Packs (AHIPP), responded to criticism of HIPs levelled by RightMove’s report, commenting: Suggestions over the last few days that the launch of Home Information Packs (HIPs) in August has distorted the market are totally unfounded. A number of factors have impacted recently on the market, including the adverse weather conditions and the three shock interest rate rises this year which have made it almost impossible for a growing number of homeowners to take on a larger mortgage.
Ockenden continued: A lack of consumer confidence resulting from the recent turmoil in the market cannot be attributed to HIPs and it is short sighted to ignore the other contributing factors. Once packs have been extended to the entire market, we should start to see the real benefits that they can offer both buyers and sellers, providing greater transparency and speeding up the buying process.
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