ARE HOUSE PRICES SET TO TAKE A TUMBLE?
As property sales fall across UK
FEARS are growing that Britain’s once red- hot property market has run out of steam.
A string of indicators yesterday triggered warnings that it could be heading for a correction – or even a crash.
Prices in London are falling at the fastest pace since the financial crisis, but the declines are not limited to the capital. Houses are also losing value across the North East as well as in towns and cities such as Winchester, Oxford, Wycombe and Blackpool.
Pockets of Devon, Derbyshire, Lincolnshire, Hertfordshire, Berkshire, Staffordshire, Cumbria and Surrey are affected too.
The number of property sales has also tumbled, by as much as 65 per cent in some areas, as buyers worried about rising interest rates baulk at the ‘silly money’ demanded by sellers.
Houses prices have enjoyed almost a decade of strong growth since the financial crisis but experts fear this has left property overvalued.
Estate agents said prices are now being cut to tempt buyers back in, particularly those worried about rising interest rates as they struggle to raise enough money to secure a mortgage.
Reuben Young, director of Priced Out, which campaigns to make housing more affordable, said: ‘There can be no doubt that
we are in a bubble – people buy housing not just for security, but in expectation that prices will rise in future. At some point the bubble will burst.’ But, in a warning to first time buyers hoping to take advantage of lower prices, he said the fall seen so far ‘ does not mean it’s bursting now’.
A report by the Office for National Statistics and Land Registry yesterday showed:
Overall UK house prices rose by only 3 per cent or £6,714 to £228,384 in the 12 months to June – the slowest increase since August 2013;
London prices fell 0.7 per cent or by £3,400 to £476,752 – the sharpest decline since September 2009 when the UK was deep in recession in the wake of the financial crisis;
Prices fell by 23.8 per cent or £220,000 in the City of London, 13.9 per cent or £187,000 in Kensington and Chelsea, and 12.1 per cent or £132,000 in Westminster;
Prices were also down year-onyear in the North East, by 0.6 per cent or £825 to £127,271;
There were also falls of 5.3 per cent in Purbeck in Dorset and 4.9 per cent in South Buckinghamshire while homeowners in Winchester, Wycombe, Stroud, Oxford and Blackpool saw declines of between 2 and 3 per cent.
Experts warned that prices have risen too far in parts of the country – resulting in a dramatic collapse in the number of sales as buyers are put off by sky high asking prices. Many sellers faced with demands to cut their prices have refused to do so – instead withdrawing their houses from the market.
Across England, the number of transactions fell 19.3 per cent between April last year and April this year. Sales were down 13.9 per cent in Wales, a similar amount in Northern Ireland, and 9.4 per cent in Scotland. But in parts of the UK the falls were even more dramatic. In Newham in London they were down 65.6 per cent.
A shortage of supply has helped prop up prices in some areas, as a large number of house-hunters chase a limited number of properties.
Experts warned that when sellers accept that the market has softened, and are willing to accept lower prices, a flurry of homes coming onto the market could push prices down further.
Howard Archer, chief economic advisor to the EY ITEM Club, said: ‘The downside for house prices is being limited by a shortage of houses for sale. If a significant amount of supply starts to come on the market you would expect that to take away some of the support for prices.’
Lee Pendleton, founder director of independent estate agents James Pendleton, said: ‘People have been asking for silly money. Sellers need to be realistic. If a house is not selling, it is usually down to price. In South West London, where we operate, house prices rose 180 per cent in ten years – it’s insane.’
Separate figures from UK Finance revealed there has been a sharp fall in the number of landlords buying properties. Some 5,400 buy-to-let mortgages were completed in June, down 19.4 per cent on the same month last year.
Both the government and Bank of England have launched clampdowns on landlords in recent years, through higher taxes and tougher lending rules.
Paul Smith, of Haart estate agents, said: ‘Areas of the market are suffering. Government policy on buy-to-let is clearly having a detrimental effect.’ But he added: ‘ The UK property market remains buoyant. Middle England is thriving.’
‘People asking silly money’
Bravo to New Zealanders. Their government has just banned foreigners from buying homes in a bid to tackle sky-high house prices.
With average house prices in the auckland capital costing NZ$ 835,000 – £431,000 – the homes are among the most expensive in the world when compared with people’s incomes.
The government defended yesterday’s move, saying that stopping foreigners snapping up houses was the only way of ‘restoring the great New Zealand dream of home ownership’. Sound familiar? Sadly, the dream of buying their own homes for the younger generation has become the stuff of nightmares – which is why it is good news that London house prices are cooling.
The latest oNS figures show that London prices have fallen at their fastest pace since 2009. The cooling down is due to many factors: fewer buy-to-lets and rich overseas buyers, but also rising interest rates and the continued squeeze on consumer spending.
Yet house prices are not lower because of falling demand. There are thousands of youngsters who are sharing houses, desperate to get onto the housing ladder. add in boomerang children (those who return to live with their parents after leaving home) and you see the pent-up demand.
It’s the supply of homes at the right price that’s the problem. The average London house still costs £477,000 – about 12 times higher than the £34,000 median salary. Moving is an option: average homes in the North cost £127,000. But the young are not daft: they will continue to swarm to London because that is where the opportunities are. Until there is more investment in our great Northern cities, they are not going to move. and why should they?
There are solutions, and it feels like Groundhog Day to keep repeating them. Yet ministers still don’t get the message. Councils must be forced to release more land and fund housing schemes. Planning regulations in and around the green belt, introduced for a post-war era, must be torn up.
More conversions from commercial to residential properties in town centres must be pushed through. You hear endless stories about councils keeping properties empty rather than going through the rigmarole of planning. Yet every study shows the more living and office space you have on a high street, the busier they are.
It doesn’t take a genius to work this out. It’s good to see the New Zealanders having a go at breaking the mould. They will be watched from around the globe as the world’s biggest cities, from Barcelona to Sydney, share the problem. In San Francisco, where two-thirds of people rent because of high prices, the authorities also have radical plans to get building again. Why, then, is this government, despite its rhetoric, so pathetic about building more homes? are ministers that scared that Nimby baby-boomers will turn against them if more green belt is built upon? They should worry more about losing the trust of a younger generation whose dreams are being broken.
Shameful indictment
The Financial reporting Council’s report into PwC’s audit of Sir Philip Green’s collapsed BhS group is sensational.
It rips Green’s accountants, Steve Denison and PwC, to shreds, claiming they made ‘incomplete, inaccurate and misleading’ statements about BhS’s financial health hours before it was sold for £1.
The detail is gripping – that Denison spent just two hours auditing the books in the months up to the sale, and failed to review the work carried out by a colleague with only a year’s experience. every trainee accountant should be given a copy of the report the day they start work.