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find out where Britain's property hotspots and coldspots are, click here
What is the latest on house prices?
Another tide of bad news washed over homeowners this week, with Communities
and Local Government (CLG) figures showing that the value of an average
property had dropped to £217,737 in February, the lowest level since last
June. Meanwhile, the Royal Institution of Chartered Surveyors (RICS)
released its gloomiest survey of the housing market in 30 years. It said
that 78.5 per cent more surveyors reported falling house prices last month
and that there had been a sharp fall in new-buyer inquiries and agreed
sales.
Is this across the board?
RICS members suggest that not all areas are engulfed in this gloom: prices are
still rising in Scotland and are falling least quickly in the North West,
Wales and London. Sentiment is worst in East Midlands and East Anglia - yet
just a week ago Halifax revealed that prices were up 2.2 per cent and 1.4
per cent respectively in those two regions last month.
Which properties are most resilient?
The CLG data shows that prices have dropped most sharply for flats, down 2.9
per cent in a month, followed by semi-detached and detached houses (down 1.5
per cent), and terraced houses (1.1 per cent). The price of bungalows has
dropped by only 0.6 per cent.
Why is the mood so bad?
Many buyers are struggling to find lenders who will supply them with the
credit they need - and the rest are being forced by the economic uncertainty
to act cautiously, according to RICS. Prospects are particularly grim for
first-time buyers and small-scale buy-to-let investors. Now, the spectre of
“negative equity” has emerged: research by the credit-checking firm Experian
has highlighted the areas with the highest loan to value percentage, and
thus the least buffer for homeowners if prices fall farther. Danger zones
include parts of Glasgow, southeast London and Manchester; the safest areas
appear to be in prime Central London and Chichester.
Just how big is the mortgage shortfall?
Last year mortgages in the UK were worth £108 billion, but the Council of
Mortgage Lenders cautions that it will be as little as £54billion this year.
This huge mismatch explains why so many apparently credit-worthy borrowers
cannot secure the sums required to meet property prices that are still very
close to record highs.
Any good news?
Some. RICS says that price falls could be worse, but are being contained by
the small number of properties coming on to the market. This indicates that,
even with higher borrowing costs and fast-rising household bills,
overstretched homeowners are still managing to make the sums add up. The
Centre for Economic and Business Research (CEBR) says that another
interest-rate cut may come as early as next month. The CEBR thinks that the
base rate will have fallen to 4.25 per cent by the end of the year -
cheering news at least for those homeowners on a tracker rate.
What's the long-term outlook?
Observers are increasingly warning of the potential for significant falls -
Capital Economics is predicting falls of 10-15 per cent over the next two
years, while David Miles, the chief UK economist at Morgan Stanley, thinks
prices might sink by as much 20 per cent in that time. But other observers
think that high employment and strong demand will help to keep the market
relatively strong. James Thomas, a director of Jones Lang LaSalle, says:
“Given the current financial turmoil, we expect mainstream UK house prices
to come off by around 5 per cent this year, with prime Central London
markets proving more resilient.” Jennet Siebrits, of CBRichard Ellis, thinks
that, unless conditions worsen, price falls should be contained at 4 per
cent this year.
The experts speak:
Although the number of mort-gages being approved has dropped, these are being
processed by fewer lenders. As a consequence they cannot cope with the
levels of business. In some cases this is leading to chronic delays in
producing mortgage offers, which causes problems when exchanging contracts
for house purchases and tying in remortgage dates with the end of an
existing deal. I would advise people remortgaging to start looking for their
mortgage deal three or four months in advance.
John Postlethwaite, principal, Punter Southall Financial Management
The mood in Hampstead, St John's Wood and Primrose Hill is fairly upbeat.
There are properties being reduced in price, but special homes are still
selling for huge prices. What has changed is that buyers are not prepared to
pay special prices for everyday properties.
Philip Green, director, Goldschmidt & Howland, Hampstead
Market conditions are cyclical. We are going to have two or three years where
house prices remain static, unless you are talking about the top end of the
market. What these conditions need is for agents to build a proper
relationship with sellers - they need to be able to convince them that their
house is worth what someone will pay today, not what it was valued at last
year.
Charles Smailes, president, National Association of Estate Agents
We have had a very busy March with good instructions and, more importantly,
better sales arranged than this time last year. Not all sellers are
generally being sensible on price. Stock has not increased significantly and
underlying the market there are plenty of people wanting to move. It is just
uncertainty that is holding some of them back.
Mike Hewson, Ibbett Mosely, Tonbridge, Kent
Properties of quality, irrespective of type, are selling well if priced
correctly, and there are many candidates to buy who have sold up and are
renting, waiting for the right property to come up.
Peter Jones, Humberts, Cheltenham
To understand this market, you need to go back to the mid-1970s, when we had a
so-called mortgage famine because building societies, which did almost all
lending, agreed to limit the supply of home loans. This caused a downtrend
in the number of transactions, as we are seeing now. The most vulnerable
agents are those who have started in the past two to three years because
they thought it was easy money. They don't have cash reserves because they
probably spent it on fancy cars and offices.
Nick Salmon, director, Harrison Murray, Home Counties
We have just had a chain collapse in which there was a first-time buyer who
had an offer for a 97 per cent mortgage, which was withdrawn. We tried to
negotiate cashback farther up the chain but it just didn't work.
Paul Adams, Adams & Jones, Market Harborough
The market has slowed significantly, apart from anything £1.5 million or
above. We had a waterfront property come on at £1.9 million and it sold in a
day. Increasingly, there are buyers who see this a good opportunity for a
deal on a holiday or second home.
Andy Goundry, Goundry Pearce, Truro, Cornwall
It is not 'cheering news' for savers that interest rates will fall to 4.25 percent. I'm sick to death of responsible people having to bail out the greedy banks, greedy borrowers and now its seems, the government. If you took out a 100 percent mortgage recently, or took equity out of your home to buy a flat screen tv or place abroad, you need your head looking at. And why don't you pay for your own foolish mistakes? No one helped out those stuck with negative equity in the 1990s.
Penelope, Marseille, France
Fancy asking an Estate Agent what they think is going to happen to UK Property Prices in the next year or two. That's like asking a Petroleum Company executive if he thinks Peak Oil is here.
Paul Stevens, Dorking, UK
A big thank you to Charles Smailes, president, National Association of Estate Agents for providing me with best bit of entertainment i've had all day. Where do you get these "experts " from?. I'm going into making "For Sale" signs, the only growth industry around here!
Richard Philptts, Stratford Upon Avon,
This article was clearly written by someone who doesnt know the difference between a hot spot (where prices are rising) and a risk area (high loan to value).
It doesn't matter what the LTV is. It is completely irrelevant to house price rises and drops. So you call numerous areas in Glasgow risk areas after you click on the Hot Spot/Cold Spot link. This is after saying that house prices in Glasgow are still rising.
Rename the link High/Low risk areas and write another article telling us some information about Hot Spots/Cold Spots as promised as there is V little here.
Also, why not speak to some experts outside the south of England?
Ian Glasgow, Glasgow., UK