On the brink of a buyers’ market?
GREAT NEWS IF you are thinking of buying a house or flat: there is plenty of research in t he nati o nal n e w s p a p e r s showing how property prices are going down. This matches the gloomy news from many estate agents and developers, that fewer people are buying property. However, those property professionals are still riding high on the recent boom. And many of the figures in the newspapers refer to the national average for house prices, which does not reflect the local picture.
Five UK house-price indices show an average of 9.7 per cent growth for the 12 months to October 2007. This is a 0.2 per cent decrease in the rate of growth from the previous month and a 0.8 per cent increase since October 2006.
The average house price in October 2007, based on all five major indices, is £214,795, up from £212,988 in September. This shows an increase of £1,807 in the value of the average property in the last month and an increase of £18,657 in the 12 months from October 2006, when the average was £196,138.
Some say it was the introduction of home information packs that slowed down property-price growth in September. Many estate agents have yet to be asked for a HIP by a buyer, however.
Property website Rightmove recorded an exceptional drop in house- price growth in September, blaming HIPs for distorting the market. Halifax and FT recorded falls in growth during the same period too — but some commentators put that down to property’s strong monthly gains during autumn 2006.
Assetz predicts that annual growth this year will level out at around 8 to 9 per cent. Stuart Law, chief executive of Assetz, believes there is a great deal of pent-updemandforproperty,especially from first-time buyers staying in rented accommodation, awaiting an opportunity to buy amid the current market uncertainty.
As a result, demand for rental property is now strong and the Royal Institution for Chartered Surveyors recently predicted that rental incomes would continue to grow strongly over the coming months (particularly for apartments), as the balance between supply and demand was altered and demand for rental property outstripped supply.
“This trend appears to refute claims that there is an oversupply of apartments in the UK, as it would be impossi- ble to predict such strong rental growth if this was the case,” says Mr Law.
With the base rate at 5.75 per cent for a fourth consecutive month in November, some fear that rising oil prices may force interest rates even higher. But there are forecasts that fear of recession will drive interest rates down.
The Council of Mortgage Lenders (CML), for example, reckons base rates will drop back to 5 per cent next year. Chris Coates, divisional managing director of Galliford Try Homes, calls this a welcome boost to consumer confidence and buyers concerned about the market, many of whom cannot secure a mortgage in the current climate.
“Demand for properties remains high within the London commuter belt and the Home Counties, but five base-rate hikes since August 2006 have taken their toll on stretched homebuyers,” he says. “The South East has seen the greatest property-price rises over the past 12 months, but with rising rents and proposed changes to capital gains tax fuelling investor interest, first-time buyers need to be ready to move quickly. However, affordability remains an issue with first-time buyers as well as families, driven by the lack of supply of new homes. Starting the new year with lower interest rates should be good news for everyone.”
The slowdown in price growth may encourage buyers-in-waiting