The price of property coming to the market has reached a “new record high”, according to Rightmove, although the data also shows the largest supply and demand mismatch is in the typical first-time buyer sector.
Their monthly house price index, published today (20 July), showed that in the 12 months to July house prices increased 5.1 per cent to £294,542.
The number of new sellers was down 10.6 per cent on the same period last year, which Rightmove said emphasises a supply crisis and a shortage of people trading up.
The index added that given the sharp drop in the number of properties put up for sale it is surprising that the monthly increase was so modest at only 0.1 per cent.
Likely influences are the onset of the seasonal summer slowdown and buyers’ constraints in affording record prices, the index explained.
The latter underlines the need for more new-build homes, which are affordable, of the right type and in the right locations. This emphasises the importance of the recent government announcement on speeding up residential planning permissions aimed at boosting supply.
However, the shortage is most acute for smaller homes with two bedrooms or fewer, where Rightmove sees the biggest demand in excess of supply.
Miles Shipside, Rightmove director and housing market analyst, said that the greatest mismatch between demand and supply is at the lower end of the property ladder, as no doubt many buyers in this category would like to afford to buy a larger home, but have had to accept that it is out of their reach and downsize their aspirations to increase their chances of a successful purchase.
“The forthcoming extra tax burdens on buy-to-let investors may help to tip the balance in favour of first-time buyers, but the consequent drop in rental property supply could push up rents.
“More supply of affordable starter homes for the growing demand from both renters and buyers is required, which means more new build for both sectors to meet the country’s current and future housing needs.
“The challenge for government, planners and developers is how best to ensure the right properties are built in the right locations and at more affordable prices.
“This will however depend on addressing capacity constraints in the building industry, the price of land for housing, the consistency of funding for key players in the construction sector and the overall stability of the housing market and the wider economy.”