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Uk House Price Increases Take A Summer Holiday
Property website Rightmove has released its latest house price
index announcing a "Summer sale" for house buyers. The report
shows that on average, house prices fell by 1% over the four
weeks leading up to 9th July, indicating that the "affordability
gap" between house prices and buyers ability to purchase, is at
last starting to close. The price fall has been heralded as a
great boost for house buyers and an indication that the fears of
an expected imminent price crash may be premature.
The statistics show that the asking price demanded by sellers
over the report period fell by an average of £1,993 implying
that; "Sellers are now realising they have to compromise some
degree of their gains in order to sell their properties," said
Miles Shipside, Commercial Director of Rightmove.
The Rightmove conclusions correspond with other reports from
Halifax and the Nationwide Building Society. Halifax reported
that annual house price inflation had fallen behind average
earnings growth for the first time since 2001.
The new figures have lead to UK firms becoming more optimistic
about the economy than they were three months ago, with companies
such as Lloyds TSB expecting interest rates to be cut next month,
leading to a general increase in economic confidence. However
indicators show that there is a long way to go to attract many
first-time-buyers (FTB).
Figures, based on mortgage value requests, released by
financial comparison site Moneynet prior to last months slow
down, gave the average value of a property purchase for an FTB as
£206,250, up from £194,961 two months earlier, a
massive jump which could not possibly have been matched by
equivalent wage increases. The recent slight price drop follows a
long period of huge price increases, and with house price
inflation a year ago topping 18%, equivalent to an average of
£29,991, it may be some time before many FTBs feel able to
enter the market. A recent survey by Abbey highlights the
trepidation felt by FTBs with just over a third indicating that
they wanted to buy a home within the next year, but only 5% of
these were actually confident that they would be able to.
National Savings and Investments (NS&I) Senior Savings
Strategist Dax Harkins said: "Despite a recent cooling house
market, house prices have continued to outstrip both savings
rates and incomes over the last year which means potential
first-time buyers need to start saving sooner and harder to get
into the market."
Rightmove believes the housing market is in for a summer where
competing sellers are more likely to be flexible on prices,
further improving the situation for buyers. They postulate that
sellers and estate agents appear to have been brought to their
senses by a painful 12 months and have belatedly taken matters
into their own hands by reducing prices to a level at which
increasing numbers of buyers are able to proceed. The report
sounds a note of caution however, stating that, "Rises in
interest rates or sellers over-optimistic expectations on price
could choke off any recovery however."
Speculation on what is in store following the summer lull
remains sceptical. The Halifax predicts house prices will fall in
2005, while independent financial adviser, Julian Crooks
believes, "There does seem to be a danger of negative equity so
people should be preparing their finances to cope."
"Sellers are having to work really hard to attract buyers at
present," says Richard Donnell, spokesman for estate agent FPD
Savills, "there are a lot of aspirational sellers out there, who
still hark back to the hot market. They need to ask their estate
agent to give them a realistic valuation and ask them how they
can improve their chances of a sale."
Rightmove has warned that the housing market could remain
static for several years whilst it waits for the incomes of FTBs
to catch up with the housing prices. Miles Shipside, Commercial
Director of Rightmove, said "As many sellers are refusing to part
with gains they have made, buyers are forced to make up the
affordability gap?The reality is it will take seven years of
static house prices and wage inflation to bridge this
affordability gap."
The market appears to be in a state of change with sellers
more open to negotiation than previously, but many buyers,
especially the critical first timers remain wary or still find
themselves priced out of the market.
Note:
The material is for general information only and does not
constitute investment, tax, legal or other form of advice. You
should not rely on this information to make (or refrain from
making) any decisions. Always obtain independent, professional
advice for your own particular situation.
References:
Rightmove House Price Index
Moneynet
mortgage comparisons
Richard works in Edinburgh for a media company, occasionally
writing for the personal finance blog Cashzilla, and drinking too
much coffee.
 MORE RESOURCES updated Thu. February / 09 / 2012
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