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News: Affluent buyers are driving prices up

A solid return of confidence to the market has sustained the upward trend in asking prices that has been seen since the autumn, said the property website Rightmove.

The average national asking price of 138,259 properties marketed by estate agents on Rightmove.co.uk in the last 4 weeks rose by 1.1% (£2,275) to a new record of £205,674. This is the 3rd successive month that a new record has been set, their April index reported.

 

April

March

Average property asking price

£205,674

£203,399

% Change in month

+1.1%

+0.9%

% Change in past year

+4.1%

+4.3%

Monthly index (Jan 2002=100)

167.3

165.5

So what is driving the national average ever upwards against a backdrop of falling consumer spending and increasingly stretched affordability?

Following the spring trend, the market features heightened buyer demand and a shortage of property coming to the market. However, an increasing number of aspiring buyers are unable to afford to get on or move up the property ladder. This ‘mini-boom’ is actually driven by demand from buyers for higher priced property types and the more affluent regions in the southern half of the country, with local hotspots in higher net worth locations.

More affluent buyers are less likely to face affordability constraints and they therefore have the confidence, as well as the means, to move further up-market. Detached properties are consistently outperforming other property types with an increase of 5.7% (£16,043) over the past 3 months, compared with the overall market rise of 4.8% over the same period.

The result is that prices are being pulled upwards by higher percentage increases in detached property than in lower value property types.

Also, the more expensive southern regions of the country outperform the 4.1% annual rise:

  • South West prices have increased by 8.5% over the last year, and by 2.3% in the month. One of the current hot spots is Bath where prices have increased by 9.5% over the last 12 months
  • East Anglia prices are 5.2% higher than a year ago, and have increased by 2.5% in the month. Cambridge is one of their top performing areas with an increase of 13.5% over the last 12 months
  • South East prices have increased by 4.2% over the last year and by 1.3% in the month both just above the national averages. One of the desirable towns is Guildford where prices have increased by 7.1% in a year
  • Greater London prices have increased by 7.7% over the last year, and by 1.0% in the month. One of the sought after areas is Hammersmith and Fulham where prices have increased by 16.3% over the last 12 months.

Miles Shipside, commercial director of Rightmove commented: "Good locations in the south of the country have always commanded a premium price."

"Now quality properties are in short supply in these areas and some buyers have both the confidence and the ability to pay more for the right property; resulting in an ‘affluent area mini-boom’ which is masking affordability constraints and driving national average prices to record levels".

From a national perspective there are indications that the spring surge is losing some momentum. The annual rate of increase of asking prices has fallen slightly from 4.3% to 4.1%, the first decrease since December. Time on the market has stood still on the month at 75 days. If the entire market was as buoyant as detached properties and the southern regions, this figure would be falling in the run up to Easter.

In addition, average property stocks per estate agent have risen from 63 to 65. Whilst estate agents report both a shortage and quicker sales on new instructions, there appears to be a sizeable rump of ‘stale’ unsold properties increasing overall supply.

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