Slump or just a more sane housing market?

Recent surveys on the value of property in the UK are suggesting that many home owners are going to be facing negative equity in the coming year, as property prices is all doom and gloom! Figures that were released at the end of the year by Hometrack and Nationwide show that there was a definite drop in values.

A survey by Halifax also suggests that there has been a steady decline in the house prices for 3 consecutive months in the last quarter of 2007. There are fewer people putting their houses on the market and potential buyers are finding it harder to obtain loans to buy property.

While there is some truth in this a more realistic picture has also been presented. A more conservative assessment has been released by the Land Registry Department of the Government. The figures released this week seem to buck the trend, providing a fresh, more measured way of looking at the prospects for the year ahead. The Land Registry’s argument is that fewer transactions and smaller monthly increases in property values demonstrate that the market is now a more stable one rather than a market in trouble.

The figures show that the average house price in the UK is now £186,009 which is an annual increase of 8.1%. London has experienced the highest increase where the average house price is now a colossal £355,643.

The Royal Institute of Chartered Surveyors seem to back up the recent comments made by the Land Registry. They predict that the prices will remain unchanged, with a possibility of 1.1% annual growth. Whilst they do also say that the number of repossessions will increase as a result of pressure on overstretched borrowers coming off of cheap mortgage deals and onto a higher rate, it should be noted that conditions are very unlikely to be comparable to those experienced in the early nineties. The general economic conditions and levels of employment are both predicted to remain constant, which should aid stability.

Our experience as mortgage advisers seems to suggest that first time buyers in general and those contracting in particular are capitalising on the calmer market and are snapping up New Year bargains. This is good news for the market in general because they are the important first link in the housing chain.

First and foremost a property should be a home and whilst values should prove a good long term bet, short term fluctuations can always occur. Anyone who followed the doomsayers’ advice not to buy in what was considered to be an overheating market in the early part of this century would now be nursing a serious feeling that they had missed the boat. Perhaps the best advice is that Contractors should simply take a long term view of any purchase and buy when the time is right for your circumstances rather than attempt to second guess the impact of macro economic forces on the bricks and mortar that we live in.

Tony Harris, FreelancerMoney


16th January 2008

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