January 29, 2008
UK housing market becoming “uncertain”
The UK housing market is facing a period of uncertainty not seen in 15 years, says UK home analyst Hometrack.
According to a survey by the housing analyst, house prices across the UK fell by 0.3% – meaning the UK housing market has seen an average price drop for the last four months in a row. This latest drop is the same decline as last month.
Richard Donnell, head of research at Hometrack, says: “The housing market faces its greatest period of uncertainty since the early 1990s.
“Rising interest rates, turmoil in the US sub-prime market and the ensuing credit crunch resulted in a major reversal in market confidence over the second half of 2007 and falling housing demand.
We found a 34% fall in new buyer registrations over the last 6 months of 2007.”
This was echoed in Nationwide’s recent house price index; Fionnuala Earley, chief economist at the building society, recently said: “The annual rate of house price growth slowed in every part of the UK in the final quarter of 2007, bringing the average rate in the UK down from 9.3% to 6.9%.
“As a result, we expect measures of asking and achievable prices to continue to report modest month on month house price falls over the first half of 2008 on the back of weaker demand.”
According to Hometrack’s figures, a tightening in the supply of homes for sale supported dropping prices across the UK. The survey showed that over January supply fell by 4.6%, which is down by 10% over the last 6 months.
Earley adds: “Looking forward to 2008, there are many uncertainties, but one of the underlying supportive factors often talked about is the issue of a lack of supply in the UK market. Some questions have been raised about how important this is and how much of a support it will be for the UK market in the future.”
More worrying for home sellers is that sales meeting the asking prices are under the greatest pressure. Hometrack’s January figures showed that the proportion of the asking price being achieved has declined to 93.5%, down from an average closer to 96% a year ago.
Meanwhile, the average time to sell a property in the UK reached 8.5 weeks – the highest level since Hometrack’s began in 2001.
But it’s not all bad news. The extent of price falls decreased over January, with estate agents reporting prices down across less than a quarter of the country, compared to 30% of the UK in December.
This news will not help first-time buyers, who were found this week to have average mortgage costs to income higher than they were in the 1990s at the peak of the last housing boom, according to the newly published UK Housing Review. First-time buyers were devoting nearly 35% of their income to mortgage costs by the third quarter of 2007.
Donnel concludes: “If mortgage rates remained relatively high over 2008 then the real challenges for the market may actually come in 2009.”
If you enjoyed reading this article and would like to stay informed with what’s happening in the property and property finance market please visit The Mortgage Broker Blog and subscribe to our RSS feed.