Home asking prices rise in May

By David Milliken

LONDON (Reuters) - Asking prices for homes in England and Wales rose by 2.4 percent in May -- the biggest increase for the month since 2003 -- after a 1.7 percent rise in April, property website Rightmove said on Monday.

However Rightmove said the rise reflected "a mixture of ambition, optimism and necessity" rather than a return to health for the beleaguered property market, because the pricing was probably not realistic and volumes low.

While record-low interest rates have fuelled a rise in homebuyer enquiries, mortgage lenders are still reluctant to lend to those without a significant equity cushion.

Job insecurity is also a powerful deterrent. The number of Britons out of work has risen to a decade high above 2 million and is expected to hit 3 million by the end of the year.

Rightmove's asking prices are still 6.2 percent below their level of May last year, and there is little evidence that the rising asking prices recorded in recent months have translated into higher sale prices in the main mortgage lenders' surveys.

In April, Halifax reported a 1.7 percent fall in house prices and a 17.7 percent annual decline, while Nationwide said prices were 0.4 percent lower on the month and a fifth down from their peak in October 2007.

The average price of a home newly advertised on Rightmove in May was 227,441 pounds, compared to an average selling price of 154,716 pounds recorded in April by Halifax.

Rightmove's own survey of asking prices was based on 61,000 homes newly advertised between April 12 and May 9, but it noted that over the same period the asking prices of 59,000 homes already on sale were cut by an average of 6.8 percent each.

The 61,000 homes newly offered for sale is less than half the number of homes advertised for the first time in May last year, when property prices were already tumbling.

Many homeowners were effectively trapped in their current properties as tighter lending conditions meant the equity in their existing home was no longer enough for a deposit on a more expensive one, Rightmove said.

This might explain why some homeowners would risk scuppering the sale of their property by overpricing it because only an overpriced sale would give them enough money to buy a new home, the property website said.

"Many people who might have wanted to take advantage of the spring selling season to trade up will be victims of equity immobility. The choice of when and how to move is now out of their hands," said Miles Shipside, Rightmove's commercial director.

"While some of the impetus behind the increase of over 5,000 pounds in average asking prices will be due to ambition or optimism, it will also be out of necessity as new sellers attempt to scrape together enough equity to move," he added.

Article Published: 18/05/2009