House Price Falls To Come As Sellers Drop Asking Prices

House prices look set to fall, wiping out the gains made this year as sellers are starting to drop asking prices, Rightmove report in their latest house price index.

Rightmove is registering over 30,000 new properties each week which is an increase of 45% on July last year as sellers rush to take advantage of the higher prices achieved so far this year and the abolition of home information packs.

The number of buyers is not matching the increase in new instructions, however, as the number of unsold homes per agent has jumped by 25% in the first half of the year. New sellers are now outnumbering new mortgage approvals by 5 to 2, and it is this ratio that fuels the prediction that house prices are set to fall during the next few months.

The projected fall in house values is likely to wipe out the 7% gains made by the housing market this year, forcing sellers to adopt aggressive pricing to attract buyers in a position to proceed, as Miles Shipside, commercial director of Rightmove comments:

“More aggressive pricing is now the order of the day, which means that conditions are ripe for a strong buyers’ market in the second half of 2010. This is likely to see the average price gains of 7% for the first half of the year wiped out by year-end, in line with Rightmove’s original forecast for the year of no net change in prices”.

The poor availability of mortgages is continuing to restrain the number of property transactions. “The number of mortgage approvals seems rationed at around 11,000 a week compared to the consistent weekly runrate of circa 30,000 newly marketed properties. A mortgage is not required for every property on the market, as around half of all properties are either withdrawn by the seller or purchased by cash buyers.”

“However, the inability of demand to keep pace with supply as buyers struggle to obtain a mortgage is shown by the continuing rise in available stock per estate agency branch”, Mr Shipside added.