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July saw the return of rising average asking prices, albeit a very modest increase. With hindsight, it appears that prices hit rock bottom late last year and, apart from a minor blip in June, have increased every month so far in 2009.

Miles Shipside, commercial director of Rightmove explains, “There is now clear evidence that there were some fire-sale prices last winter, when a few brave buyers correctly called the bottom of the market. With growing confidence that we’ve passed the bottom of the market, buyers are more active, although they may discover that many of the best buys have have already been snapped up.

Having seen the average asking prices rise by nearly 7% so far this year and transaction levels bottom out, the quandary for many existing and aspiring home owners is the future direction of the housing market given the continuing UK and global recession. Rightmove discusses the three possible scenarios: a ‘Double Dip’, a ‘steady state’ or a ‘resurgence’.

• The ‘Double Dip’ scenario would see asking prices falling by 10% in the second half of the year to end 3% down overall in 2009, as mortgage lending remains tight, unemployment continues to rise and many more repossessions come to market. This would give a further window of opportunity for bargain-hunters who missed out on the best buys last winter.

• The ‘Steady State’ scenario would see prices stay flat for the rest of the year, ending at circa 7% up, as both mortgage availability and the number of sellers coming to market remain at historically subdued levels.

• The ‘resurgence’ scenario would see prices go up by a further 5%, ending the year 12% up, as buyer interest and mortgage availability pick up significantly while supply remains relatively constrained.

While there are innate risks in forecasting, key indicators increasingly suggest that prices have bottomed out. We have seen a modest recovery in mortgage approvals and an improvement but not an oversupply of new sellers coming to market. With no real signs of increased mortgage funding or a relaxation of high deposit requirements, the ‘Steady State’ is the most likely scenario for the remainder of 2009.

Historically low volumes will persist, which will mean that asking prices have seen most of their gains for this year. In areas of chronic under-and-over supply there will be the scope for further price rises and falls, with unemployment-driven repossessions dragging on into 2010 and 2011.

Shipside says, “Following a period of suspended animation in 2008 when activity froze, we have seen a considerable spring thaw. However, with only seven volume lenders remaining in the lending game, including three government-backed institutions that are prioritising their balance sheets over new lending, we are set to bump along the bottom for some time yet.”

Source: Rightmove

To view the full Rightmove July 09 report, including regional average asking price breakdowns, click here.

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