Slump in prices set to stay for UK housing market

A slump in the average asking price for houses in England and Wales appears to be imminent, according to a study from a national estate agent.

The findings show that a decline in the cost of property is all but certain, fuelled by overvaluations of 19 per cent and the worst record of affordable homes in 13 years.

This is according to Cluttons, the property consultant and think-tank, the Oxford Economic Forecasting group, which collectively point to price falls of up to 4 per cent by the end of the year.

The research shows that there is an 85 per cent likelihood of such a decrease, while there is just a 5 per cent chance of a 17 per cent slump in prices over the next three years.

This overall picture of decline clashes with the latest data from property website Rightmove, which predicts a mini wave of higher prices, as sellers aim to attract any festive buyers over the Easter holidays.

According to the group's reading of the market for March, prices in England and Wales rose by 0.6 per cent – or an average of £1,132, as sellers sought to maxmise the profits of their home.

But analysts warn that sellers are misguided if they believed buyers are ready to pay top rate prices.

A spokesman for the website said: "It's counter-intuitive that sellers are looking to push up prices when there is already a huge oversupply of homes for sale. They need to be more realistic. Only people who are being realistic are selling at the moment."

Last week, Freelance UK reported on the untouched backlog of UK property which is now at its highest since March 2003.

Market observers and estate agents have suggested that attracting first-time buyers is critical if the market is to shift some of the existing properties that are still for sale.

Last week, Gordon Brown announced he would raise the threshold on stamp duty for first time buyers from £60,000 to £120,000.

Though some accuse the Chancellor of not taking action soon enough, given data that shows the average age of the first-time house buyer in the UK is 34-years-old.

According to the Council of Mortgage Lenders, this gloomy picture is made worse by the lowest number of first-timers buying property since the 1970s.

The CML said there were 358,000 buyers last year; a reduction of 9,000 on 2003 and a 40 per cent drop off from the boom times seen in 1999.

"Rapidly rising house prices have meant that potential first- time borrowers are unable to raise a sufficient deposit to enter the market. Anecdotal evidence suggests that first-time buyers are clubbing together with friends or, potentially, with the help of their parents to buy, because of affordability constraints."

The Council said the situation has been made worse as wages for people have not risen in line with the housing market.

The average price for a first home in England and Wales is now around £117,000 – a sizeable sum, even when compared to the average cost in 1999 of £58,000.

It is expected that this price could now increase as unduly optimistic sellers start to fluff up the cushions in their property, keen to welcome in any Easter house-hunters.


23rd March 2005

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