House prices increase begins to slow down as annual price growth fell from 3.2% in January to 2.3%, the weakest since April 2013. On a monthly basis, average asking prices rose 2% t0 £306,213, the slowest rate of growth in the month of February in eight years.
Miles Shipside, Rightmove director and housing market analyst, said sellers would be taking a risk by overpricing their properties.
He said a number of factors were making buyers more cautious, including inflation, which hit a two-year high of 1.8% in January and is expected to reach about 3% in early 2018, putting more pressure on household finances.
“Property prices are still 2.3% higher than a year ago, but perhaps we’re approaching the territory where many buyers are unable or unwilling to pay what sellers are asking, given the negative combination of rises in the cost of living, tighter lending criteria and a dose of Brexit uncertainty.”
Rightmove said the housing market was boosted in early 2016 by “frenzied” buy-to-let investors who rushed to complete transactions before new stamp duty rules were introduced in April, making this year look subdued by comparison.
However, it added that demand was holding up, with more than 131m visits to its website in January, up 3% compared with a year earlier.
“While seller pricing power appears to be on the wane overall, the numbers of deals done is very robust, scarcely lower than during last year’s tax-saving rush,” Shipside said.
Estate agents reported that buyer interest was significantly diminished if properties were priced more than 5% too high.
Rightmove analysed more than 100,000 newly listed homes and found that sellers were 40% more likely to sell with that agent if the property was correctly priced when it first came to market.
Kevin Shaw, national sales director at estate agency Leaders, said: “Tempting as it may be, it’s never in the interests of a seller to set an asking price above what a property is really worth. Setting an accurate price, based on local market conditions, is crucial for achieving both a quick sale and the best possible price.
“Overpricing, particularly in a price-sensitive market, will result in the property sitting on the market until the price is dropped, losing the interest of buyers and ultimately achieving a lower price in the end.”
Brian Murphy, head of lending for the Mortgage Advice Bureau, said the report suggested buyers were sticking to their budgets with very little “wiggle room”.
“It’s likely that this is due to stricter lending criteria, and suggests that buyers are getting their ducks in a row financially before they start their property search, in terms of applying for their mortgage, to understand how much they can spend,” he said. This meant that agents were finding it harder to “upsell” properties by encouraging buyers to look at properties that were out of their price range.
Changes in asking price varied widely in London, according to Rightmove. The biggest annual riser was the borough of Camden, where average prices jumped 27.3% to £1.4m over the year to February.
The worst performing area in the capital was Kensington and Chelsea, where average prices were £2.1m in February, down 14.6% compared with a year earlier.