House prices are being supported by a shortage of property for sale, with Rightmove reporting the lowest stock levels for 18 months.
The online property portal reports that for every 10 properties coming off the market, just eight come on. As a result, asking prices rose by 0.6% during September, compared to a fall of 2.2% in August.
Rightmove says homeowners are being deterred from selling because of a lack of new property to buy as well as high mortgage deposit requirements. New seller numbers currently average around 23,000 a week – but 151,591 properties are expected to come off the market this month.
The average unsold stock per estate agency branch has dipped to 69, the lowest level since February 2008. In addition, Rightmove says there are around 20% fewer estate agency branches than in 2008.
“Some would-be sellers may be concerned by the limited choice of suitable property currently available, and will have to decide whether to take a chance on finding something fresh to the market after they have found a buyer,” says Miles Shipside, commercial director of Rightmove.
“This increases the risk and stress of moving, but with choice getting increasingly limited in popular areas they need to have a buyer lined up to improve their chances of securing their next home.”
The impact of falling house prices on equity levels is another key factor deterring would-be sellers from putting their homes up for sale. Banks and building societies continue to only lend to people with at least 25% to put down as a deposit, meaning anyone with less equity is unable to trade up.
Shipside says: “Many aspiring sellers could face years trapped in their homes until values rise enough for them to join the equity-rich club, and even then they will be heavily dependent on the number of bottom-of-the-chain first-time-buyers.”
New figures from mortgage lenders show a decline in new loan approvals during August. New lending during the month was an estimated £12.6 billion, down 13% from July's total of £14.5 billion and 37% lower than last August’s £19.9 billion.
Paul Samter, economist at the Council of Mortgage Lenders, which published the figures, rules out a significant pick-up in lending in the short-term. However, he says lenders are finding it easier to access wholesale funding, which is good news for borrowers.
“This could result in a gradual easing in constraints on the supply of funding over time,” he explains. “However, demand from consumers and a prudent approach to lending criteria are likely to mean that the market remains subdued."
Brokers are equally gloomy about the outlook for the property market.
Brian Murphy, head of lending at independent mortgage brokers Mortgage Advice Bureau, says: "The underlying problems stifling activity in the property market remain the same - buyers are still having to find large deposits and lenders are being very selective with regards to those who are in a position to buy. We don't see this problem rectifying itself any time soon."
Meanwhile, Andew Montlake, director at brokerage Coreco, rules out any return to “normality” until late 2010 or 2011.