The UK’s largest property portal Rightmove has found that asking prices of UK properties for sale on the portal were raised in January, because, it says, demand outstripped the supply of homes for sale. According to the portal’s monthly index, people selling property in England and Wales on the portal, raised their asking prices by an average of 0.4% during January.
As most readers will know, it is a severe shortage of UK property, met with a much smaller increase in demand and sales that has fuelled rises in UK house sale prices since between the second and third quarter of last year, depending on which index you read. So, the January rise in asking prices revealed by Rightmove, and the reasons given by the portal are both backed up by other reports.
So, with that in mind, should we be happy that asking prices are higher than a year ago? The answer to that is, of course yes at this juncture, because we know a supply shortage is fuelling growth. However, we should never be too happy about growth in the Rightmove index, because it is an index that is heavily prone to finding positive growth.
The Rightmove index is based on the average asking price of new properties being added to the site within a given period of time. Because people tend to ask a higher price at the outset, this is a large factor in the positive results the Rightmove index so often brings to bear. As Rightmove has conceded a look at asking prices as time progresses has mostly shown a downward slide during the crisis.
This could also explain why the Rightmove index has shown asking prices continuing to rise throughout the UK housing market crisis, with only a few monthly decreases of a very marginal nature seen in 2008 and 2009.
In fact: as the housing market crash continued to worsen at the beginning of 2009, the rise in asking prices recorded by Rightmove actually accelerated. At the time the portal put this down to estate agents pushing up asking prices in order to gain instructions from dissolution and — to be fair — deluded potential vendors.
Asking prices rose in February, March and April according to the Rightmove index. In February the rise was put down predominantly to unrealistic vendors and estate agents desperate for instructions. In March again these took most of the responsibility. However, the more the rises continued the more confidence grew that it was a genuine sign of the strength in the recovery, and the more the attached commentary would focus on the positives and less on the potential negatives.
In closing: yes, against the backdrop of a UK economy on a clear path from rebound to recovery — failing a catastrophic mismanagement of the stimulatory exit –, an improving labour market, improving liquidity, rising house prices and slowly improving credit availability, the Rightmove index adds to the reasons to feel positive about 2010. It just has to be put in the proper context is all.