House Prices Fall
Latest data indicates falling house prices (see chart below). We haven’t seen such consistent house price falls from all the main trackers since the dark days of 2008.
All these statistics fluctuate but such consistency may well be an indicator of difficult times ahead.
The only tracker recording an increase was the Land Registry which records changes in actual completion prices. The others all track values earlier in the sale process e.g. asking prices or mortgage valuations and are therefore more indicative of what the market is doing at a given time.
We believe that market conditions will be much more difficult in the second half of the 2010 and we could well see significant house price falls and falling volumes of sales.
Three main factors will contribute to this situation:
Unemployment-The well publicised public sector redundancies will impact overall unemployment levels just as we come out of a major recession. We would expect this to lead to increasing distressed sales which may drag down prices. The impact will differ across the country as overall dependency on public sector jobs varies greatly.
HIP’s withdrawal-The coalition government has withdrawn home information packs. This means there are no up upfront costs to put your home on the market. The volume of property on the market has therefore increased dramatically. Rightmove has recorded a 22% increase in number of home sellers. At the same time demand has been subdued, so the old law of supply and demand would suggest that prices are likely to fall.
Mortgage lending remains very restrictive. Majority of buyers need a mortgage to buy their next home so this is reigning in demand which will drive prices lower. Recent data from BBC suggests 58% of mortgage deals require a deposit of 25% or more. With average house prices still over £186,000 that means a deposit of £46,000 which is not feasible for a huge number of buyers who used to drive the market in previous years.
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