Prices of UK Homes Still Falling
With the increases in mortgage lending that occurred in the UK during the month of March, many homeowners felt that the recession was nearing an end and that they would soon start to see an increase in house prices.
Not so, says Nationwide, which reported that house prices fell about 0.4% in April after a short lived increase in the previous month. Surprisingly, the figures released by the Land Registry showed that, in fact, house prices did fall during March in spite of the increase in sales.
The fall in prices has been somewhat slowed of late, but the prices are still continuing to slide. One reason given for this slow down is that home buyers who do have some cash saved are able to take advantage of the low mortgage rates and are able to meet the lending criteria of placing large deposits on the mortgage. Thus they are able to buy homes at the prices significantly lower than what they were a year ago and still meet the sellers’ asking price.
Even though Nationwide is reporting that house prices are still falling, the rate of decline is much better. It was 15.7% in March and improved slightly in April at 15%. The asking price of the average home on the real estate market today is just over £150,000, which represents a decrease of 16.2% on the price of the same homes this time last year. The prices are almost the same as what they were in June of 2004.
While the prices of homes in the UK are falling overall, this is not true for specific areas of the nation. There are some areas that are experience a rise in the prices. Reports from the Land Registry show that house prices are rising in London and Wales and in some areas of the North East and South West. Some properties in Scotland and Ireland have only fallen to prices comparable with those of 2006, while in other areas they are back to 2004 levels.
According to Fionnuala Earley, chief economist for Nationwide, “The housing market is very sensitive to income and, as a result, conditions in the labour market are crucial to its performance.”
As a result, she said, even though house prices have fallen and the holiday on the Stamp Duty announced in the 2009 budget was designed to make it easier for people to obtain mortgages, very few people would be in the situation where they could take advantage of the offer.
Ms. Earley went on to say, “The economy is now in the deepest recession since the Second World War and unemployment is continuing to increase, with the latest data showing that it breached the two million mark. Even though negative inflation will mean that real earnings will be increasing, it is likely to be some time before this feeds into a strong enough change in sentiment to encourage a full scale revival in the housing market.”
Nationwide claims that prices will continue to fall for the next six months. This means that buyers will continue to be cautious and put off buying a home until they feel that the market has stabilized more than it is right now. All economists in the UK are predicting a further fall in the prices and Howard Archer of Global Insight goes so far as to predict a decline of about 12% for 2009 and a further decline of 5% in the first half of 2010.
Tags: April, home buyers, fact, real earnings, duty, housing market, house prices, MortgagesAt the same time, Archer does concede that the crisis in the housing market may have reached its peak “helped by the substantial fall in house prices from their 2007 peak levels and sharply reduced mortgage rates. Nevertheless, housing market activity remains very low by past norms and our expectation is that the pick up will be both gradual and fitful for an extended period given very poor economic fundamentals and still relatively tight credit conditions.”
