House asking prices near all-time high as ‘granlords’ size up the market


Asking prices for homes coming on to the market in England and Wales rose by 1% in the month to mid-March and the average has almost recovered to the all-time high reach last summer, according to the latest figures from property listings website Rightmove.

The site said there had been a 3.2% increase in the number of homes listed for sale over the past 30 days, but supply remained tight in the types of homes targeted by first-time buyers and what it dubbed “granlords” – investors who may be considering using their pension pots to buy property.

New rules from 6 April will allow retirees to access their pension funds as they wish, and some of this money is expected to flow into buy-to-let investments. Estate agents are already reporting interest from people eyeing up a potential buy-to-let.

Ken Hume of James Alexander in Norbury, south-west London, said this had been the case in the area he covered.
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“We’ve had inquiries from a number of older people considering buy-to-let which is likely to have an effect this year, with interest expressed particularly in smaller flats where yields are higher.

“As this end of the market is not as busy in our local area, these buyers are a welcome addition, especially as they are often 100% cash.”

Mark Smeeth, an estate agent at Connells in Yeovil, said his branch had also received inquiries from investors who might be considering using their pension pots to become landlords. He added: “There is some competition with first-time buyers – the cheaper properties tend to get snapped up quite quickly.”

Rightmove said the distraction of the looming election and the introduction of tighter lending rules last year meant that the rise in prices was more muted than that recorded in mid-March 2014, and the lowest seen at this time of year for three years.

The average asking price of homes coming up for sale rose by £2,748 to £281,752 – just £30 below the high reached last June 2014. The annual rate of increase fell to 5.4%, although first-time buyer properties are priced 7.6% higher than a year ago.

Miles Shipside, Rightmove director and housing market analyst, said changes such as the new lending rules brought in with the mortgage market review (MMR) and the Bank of England’s cap on big mortgages had acted as a brake on rising prices.

However, buy-to-let loans are not included in the MMR changes and with supply of first-time buyer homes up by just 2.6% over the month, new landlords could put extra pressure on prices.

Shipside said: “The lower-end properties favoured by first-time buyers and investors are in short supply in many locations due to increased competition among mortgage lenders, who are also chasing landlords with offers of low rates for lower risk.

“Some cash-rich pension pot buy-to-let investors will also be tempted by those tax-deductible mortgage rates, creating further upwards price pressure in a market sector that is already out-stripping the higher-priced ones.”

But he added: “When the realities of the possible tax penalties on larger withdrawals are better understood by aspiring new landlords, their appetite for buy-to-let may diminish and anticipated demand may be less than speculated. It’s a hard one to call.”

Although the number of buyers entering the housing market has dropped off since last year, the disconnect between supply and demand is still pushing up prices. Rightmove said estate agents had an average of 59 properties on their books in February – up from 58 in January but below the 63 each at the same period last year.

Asking prices continued to fall in London, Rightmove said, dropping by 0.4% during the month to mid-March to an average of £580,308. In contrast, in the east of England they increased by 2.5%, to £297,863, suggesting sellers are hoping to cash in on the ripple effect from the capital.

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