Asking prices inch up as a lack of affordability crunches property market

By Isabelle Fraser

CREDIT: TOBY MELVILLE

Crunched levels of affordability have flattened asking prices, despite climbing demand for homes.

Online portal Rightmove reported that asking prices for homes are largely flat, with the average property valued just 0.1pc higher in July than in June.

The annual rate of growth was just 2.8pc, with crunched levels of affordability slowing down any increase in prices. This puts the average asking price for a home in the UK at £316,421.

Rightmove also said there has been an annual increase of 4.6pc in the number of agreed sales, with 7.6pc more sellers coming to market compared to last June and 45pc of agents’ stock sold.

This is at odds with the findings of the survey last week by the Royal Institution of Chartered Surveyors, which reported stalling activity in the market and a record low level of stock. However, this could be explained partly by its focus on London, and by the decline in activity and prices a year ago after the referendum to leave the EU. Last July there was a monthly fall of 0.9pc as uncertainty over the referendum result.

The high demand and low level of stock have kept asking prices buoyant.

Miles Shipside, Rightmove’s director, said that despite high levels of demand, “especially as you go further north, sellers should note the market remains very price sensitive as some properties are hitting their price ceiling."

He said: "Buyers, many of whom are sellers too, will struggle to afford to pay much more.

CREDIT: JOHNNY GREIG UK / ALAMY

"Wage growth is muted, there are signs that consumer credit is tightening, and at some point there will be the first rise in mortgage interest rates for a decade or more which will come as a shock to buyers who have either forgotten or have never experienced interest rates going up as well as down.”

Monthly rises in asking prices were recorded in London, the South East, Wales and the West Midlands.

He added: “High demand will continue to underpin prices, but we are seeing stretched affordability limiting the pace of rises, especially in the south of the country.”

It comes as Countrywide reported the average rent in Great Britain has increased 1.1pc in the year to June, up on last month’s 0.5pc.

In London, however, rents have been falling, down 0.8pc in the same period, and these falls were offset by increases across the rest of the country.

It also reported that the level of overseas-based landlords has more than halved since 2010, reaching a record low.

Across the country the amount of foreign landlords has gone from 12pc in 2010 to 5pc in the year-to-date. In London that collapse has been even more dramatic, falling from 26pc to 11pc this year.

This is due to a decline in foreign investment in buy-to-let, which Johnny Morris, research director at Countrywide, said was caused by “a steady increase in foreign investors’ tax bills combined with more recent falling expectations of price growth in London”.

He added: “As well as having to contend with increased stamp duty and the annual tax on enveloped dwellings (ATED), overseas investors also saw the removal of capital gains tax exemptions in 2015.

It found that 33pc of foreign landlords in London are from Asia, and that last year the average overseas-based landlord earned 35pc more in rent than those that were UK resident.

http://www.telegraph.co.uk/property/house-prices/asking-prices-inch-lack-affordability-crunches-property-market/