The average price for homes entering the market hit a new record of £372,894 in May, as average new seller asking prices surged by 1.8%, or £6,647, according to property portal Rightmove.
This comes as buyer demand is reported to be 3% higher than in 2019, with sales agreed lagging behind 2019 levels by just 3%.
First-time buyer demand has seen an uptick of 6% compared to pre-pandemic levels. Rightmove said a surge in confidence, boosted by falling mortgage rates, has likely contributed to this uptick.
Even though mortgage rates remain significantly higher than pre-mini-Budget levels in September, the average 5-year fixed rate for an 85% loan-to-value (LTV) mortgage is now down to 4.56%, from 5.89% in October.
It’s taking longer to sell properties now; first-time buyer properties are on the market for an average of 53 days, up from 35 days a year ago. Second-stepper properties are selling within 52 days, compared to 28 days last year.
Tim Bannister, Rightmove’s director of property science, explains that the significant leap in new seller asking prices this month indicates a delayed response and growing seller confidence, which is typically observed earlier in the spring season.
He said: “This month’s record price is a strong indication of sellers’ confidence, and we can see from activity levels and the still relatively limited choice of property for sale that this confidence is justified in some segments of the market.”
But there were variations across the UK. Scotland experienced a significant rise, with average house prices soaring by almost 5% in a year, making the average cost of a Scottish home £191,407. Meanwhile, in Wales, prices rose by 0.7% to £259,452 with properties staying on the market for 52 days before being sold.
London continues to have the highest property prices in the UK, with an average house price of £696,477. Hackney experienced the most substantial increase, with prices now at £724,189, a rise of over 5% compared to last year.
Despite the positive trends, Bannister cautioned that sellers at the top end might need to price more competitively to find a buyer in the current market.
Reaction
Tomer Aboody, director of property lender MT Finance:
“With mortgage rates becoming more stable and considerably lower than around the time of the Kwasi budget, there’s definitely more confidence in the market with sales numbers almost returning to around pre-pandemic levels. More sellers are coming to the market and buyers are feeling more bullish in proceeding with their purchases.
“With possibly the final base rate increase on the horizon and some positive noises coming from the government, it will be interesting to see how the market further adjusts and whether it continues to defy expectations in coming months.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman:
“These are, of course, only asking or aspirational prices, not prices paid but do reflect what we have also been seeing in our offices – now that inflation and interest rates seem to be at or approaching their peak buyers are slowly returning with added confidence making it feel like a more normal spring market.
“However, without the intense competition for property that we saw 12 months ago, those not relying on mortgages or who are equity rich from Covid are very much to the fore but don’t want to be rushed before taking the plunge.
“The reasons for moving in many cases haven’t disappeared even though the race for space may be run. Looking forward we don’t see any particularly significant changes other than supply and demand continuing to balance out.”
Peter Beaumont, CEO at TML:
“It’s no secret that house prices have been volatile over the course of the year, and while prices have risen according to Rightmove, it’s too soon to tell whether this trend will hold. However, as spring begins in earnest, buds of optimism are beginning to sprout within the market. Transaction levels have been rising, a key indicator that demand is beginning to return as consumers grow in confidence amongst predictions that the inflation rate will fall.
“However, with a further increase to the base rate this month, there will still be uncertainty around mortgage rates for those preparing to get onto the ladder or re-mortgage. First time buyers will be weighing up whether to stay renting despite increasing rental prices or take the plunge. Affordability remains a key challenge, and seeking guidance from a broker will ensure customers are able to obtain the right product for their circumstances.”
