Asking price on houses rises 2.4 per cent in May

Sellers are driving hard bargains to fund next buys

A mixture of "ambition, optimism and necessity" among sellers has driven a surprise 2.4 per cent jump in asking prices for homes over the past month, according to the property website Rightmove.

The group said that the average asking price rose to £227,441 in May from £222,077 in April, representing the largest percentage rise in May seen in six years.

However the jump, which still leaves asking prices 6.2 per cent down on the year, also reflects the scarcity of property coming onto the market, it added.

"Sellers may be pricing at this level because they fear that their equity could be eroded to danger levels where they can't find an affordable mortgage deal on their new purchase, due to lenders' stricter loan-to-value ratios," it said.

Banks and building societies are routinely requiring 25 per cent deposits from borrowers, compared with about 11 per cent this time last year.

Miles Shipside, commercial director at Rightmove, said: "Equity-poor home owners are either not coming to market or are having to price too high. The scale of the problem is potentially far worse now than in the 1990s downturn, as remortgaging activity was then in its infancy."

On the buy side, Rightmove reports that prospective buyers with nothing to sell are increasingly active, adding to a mismatch between supply and demand.

The Rightmove index only measures the asking price, rather than the selling price achieved when a house is sold. Its index has often registered more optimistic readings than the more definitive measurements published by the Nationwide, Halifax and the Government.

Economists point to the relative thinness of the current market. With transactions down by as much as two thirds on past levels, "price discovery" is more difficult for buyers and sellers alike in an illiquid market.

The rises in the Rightmove indicator do confirm some optimism in the world of real estate. Surveys by the Royal Institution of Chartered Surveyors suggest that new-buyer interest has revived from its low point last winter.

The Bank of England and the Council of Mortgage Lenders also confirm a rise in mortgage approvals, though these are still well down on past levels and not sufficient to prevent prices falling further this year.

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