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How long will 'Mr Average' have to rent?

New sellers coming to the housing market this month raised their asking prices by 3.1% to an average of £230,030, leaving prices virtually the same when compared with February last year.


By Julia Kollewe, – Feb 21st 2011


Low transaction levels in the housing market now look to be the norm for the foreseeable future, says property website Rightmove. This means that ‘Mr Average’ will be left out in the cold in the buying and selling game unless someone lends a helping hand.


Miles Shipside, director of Rightmove, says: “Any hopes that transaction volumes may be on the springboard preparing to return to historic norms will have been dashed by lenders’ predictions that 2011 lending volumes will match 2010′s dire levels.


“The current subdued market volumes are set to be the new norm unless the seemingly never ending discussions between government and mortgage lenders find some way of increasing ‘Mr Average’s’ access to lower deposit mortgages without pricing them out of the market.”


There appears to be a three tier market, with the more ‘elitist’ tier being courted by lenders attracted by low loan-to-values that help them build a more profitable and lower risk mortgage book. This supports an active but low volume market in Britain’s desirable locations, with a bias towards top-end buyers and the more affluent south. A few ‘elite’ markets are moving, with new seller numbers in London up by 21% on last year.


‘Mr Average’

By contrast, the middle tier – traditionally the mass market that includes ‘Mr Average’ – is suffering from paralysis due to a lack of mortgage finance and insufficient equity to trade up. Only 530,000 mortgages were taken out in 2010, while Rightmove recorded 1.3 million properties coming to market over the same period.


Shipside says: “Most sellers can afford to hold out for a buyer who will hopefully pay a fair price as the house ideally suits their needs and represents comparative value. In areas of more plentiful supply that can mean a long wait with no guarantee of success. New sellers see comparable properties to theirs on the market so they and their agents try a similar asking price.


“Without a really pressing need to sell you can see why price re-adjustments seem painfully slow in many local markets and they will not fall by enough to really assist the return of mass market affordability.”


‘Bargain hunting bottom-feeders’

In the more economically depressed areas of the country where forced sales are becoming more prevalent, some sellers are falling prey to the ‘bargain hunting bottom-feeder’ investors. These cash-rich buyers seek out distressed sales and represent the third tier of the current market. When interest rates start rising, increasing the likelihood of more forced sellers coming to market, they will benefit from even greater opportunities.


Shipside says: “Some ‘average’ sellers of yesteryear are now trading up by letting out their own home and renting the next rung up the ladder as they cannot get a suitable mortgage to sell-up and buy a more spacious house.


“The ‘accidental landlord’ is now being joined by the deliberate ‘limbo-landlord’, who is indefinitely entering the rental market by letting out their existing home and purposefully moving up the ladder by becoming a tenant in a larger property. Meanwhile, professional investors are being funded by lenders to buy starter homes, condemning many of those who would have been first-time buyers in the past to be permanent residents of the rented sector.”




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