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UK Residential Property Prices Slip Again

UK Residential Property Prices Slip Again

New research by the Royal Institution of Chartered Surveyors (RICS) has revealed that the revival of the UK residential property market has apparently run out of steam following the end of the stamp duty holiday for first-time buyers in March this year.

The RICS report found that 19% more chartered surveyors observed residential property price decreases than increases in April 2012 and 17% of them predicted further slippage of UK residential property prices in the near future.

6% of chartered surveyors also reported a drop in residential property sales as opposed to a rise, the first time this has happened since September 2011.

Peter Bolton King, Housing spokesman for RICS, stated that the results of the research are far from surprising: “With the recent surge in activity brought on by March’s stamp duty holiday coming to an end, it is unsurprising to see that prices across much of the country are continuing to fall”.

Many of the negative forecasts for UK residential property in the near future are based on the fact that many of property sales would ordinarily have happened throughout the year, but the scramble to push through deals and invest in property before the end of the stamp duty holiday in March has seriously affected the annual pattern of residential property sales.

With UK residential property prices on the slide once again it is time for property investors to keep the market afloat whilst snapping up property bargains across the country. Wales and the West Midlands have experience the largest drops in residential property values, so these areas could see heavy interest from investors.

More than 66% UK property owners believe the value of their home will stay the same in 2012.

New research from Clydesdale and Yorkshire Banks has found that the majority of the UK public believe the value of their home will stay the same over the next 12 months.

The study revealed 66% of homeowners do not expect UK residential property prices to change considerably in either direction.

Only 16% of respondents anticipate that the value of their property will fall again this year, with the remainder expecting the costs to rise.

Retail Director for Clydesdale Bank, Steve Reid stated: “It is encouraging that such a high percentage of people have confidence in the property market and the value of their home.”

The research also revealed property owners in London are the most positive about the prospects of their property prices this year, with 39% believing the value of property is likely to escalate.

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According to UK property transaction figures, the number of private residential property sales fell by 11,000 during 2011, continuing the property slump that has now lasted for 3 years,.

Statistics released by HM Revenue and Customs show UK residential property sales dropped to one of the lowest totals recorded, with just 869,000 residential properties sold last year compared to the 880,000 homes sold in 2010.

The slowdown in the housing market in recent years was most evident in 2009, when only 848,000 houses were sold, (about half the number of transactions recorded in a year before the financial crisis began).

The Bank of England (BoE)  said recently that it believes even more lenders will tighten their credit criteria in 2012 and it will be even harder for would be purchasers and property investors to get a mortgage, heightening concerns UK residential property sales could hit another record low this year.

The first-time buyer sector of the industry made an ever so slight slight recovery in recent months after dropping to a three-year low last autumn.

However, the recovery may prove temporary with the stamp duty holiday for first-time buyers closing in spring 2012.

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The threat of a double dip recession and the current Eurozone economic crisis have been cited as influencing factors scaring both UK property buyers and sellers.

With the reduction in disposable income and the increased cost of living, it appears that UK homeowners are aiming to sit tight and ride out the worst.

Squeezed purchasing power, tightening fiscal policy, a weakening labour market and concerns over the economic outlook limit the options for potential buyers and are factors for driving down property prices in the UK housing market.

Even though the UK has had record low interest rates of 0.5% since March 2009, it is not enough of an incentive for many homeowners.

Mortgage application fees are now higher than in previous years and there are the direct costs of moving house like stamp duty and people tend to spend money on a new home as well, so for many UK homeowners staying put is the obvious thing to do.

A recent survey discovered that in the UK…

  • 14 Million households can afford to move,
    (Would not struggle to get a mortgage)
  • 8 Million people own their home without a mortgage
  • 6 Million people have a mortgage of less than 50% loan to value.
    (But the cost of moving is prohibitive)

Property prices are down 19.3% from the summer of 2007, using the Halifax measure, and according to some economists, they have further to fall.

However, Halifax itself has reported that mortgage payments for new borrowers are at their most affordable level for nearly 15 years.

Predictions from some leading economists state that after a 3% fall this year, property prices will drop by up to 5% in 2012 and the same again in 2013.

When viewed over a long period, UK house prices tend to rise at an average of 1% above inflation. However, in the last 15 years, UK property prices have risen 5% per annum in real terms.

Prices in the UK will eventually have to revert back to trend, whether that is by a US or Irish-style property crash, or thanks to low interest rates, something similar to Japan where prices have fallen every year for the last 20 years.

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Hometrack stated this morning that property buyers fell by the wayside again last month with a drop of 2.6% in applications during September. The number of new sellers also edged down with new listings falling by 0.6%.

Until the end of last week, this year has seen property supply rise at almost twice the rate of demand.

Over 9 months, there was a 22% increase in new instructions, but a rise in applicants wishing to purchase of only 11%.

The average time that a property is on the market has increased to 9.6 weeks.

According to Hometrack, house prices have fallen since July 2010 – That is 15 consecutive months.

London’s average at 0.2% a month continuing growth has propped up the overall UK property market.

Hometrack’s new report also predicts that UK property prices will accelerate downwards before the end of the year.

The report says that its 1,500 agents are under growing pressure from vendors to secure sales before the end of the year. They also highlight an increasing proportion of properties sticking on the market – suggesting price adjustments will have to be in order.

Hometrack’s Research Director, Richard Donnell, said these would “ultimately kick-start a new phase of re-pricing across the market”.

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Struggling property prices will add even more gloom to the UK economy with house prices dropping again in July 2011 as many buyers struggled to secure mortgage finance. 

Even worse was the news that UK homeowners were reluctant to put their properties on the market because of the slump in valuations.

 The latest UK Housing Market Survey data published by the Royal Institute of Chartered Surveyors (RICS), revealed that 22% more chartered surveyors reported a fall in house prices. 

The average number of sales over the last three months has fallen to 14.2, the lowest for more than two years. 

A RICS spokesman said: “The UK housing market continued to stall during July; prices edged lower and sales levels remained subdued. While the holiday season appears to have had some impact on the market, the continual problem of inaccessible mortgage finance is still preventing first-time buyers accessing the market. With prices continuing to slip, it appears that many potential vendors are unwilling to accept reduced selling prices, so are reluctant to enter the market.” 

Pessimism still prevails in the UK property market, with house prices predicted to continue to sink. However, there are signs of a possible recovery as demand edged up.

 Interest from potential buyers has been fairly muted since the beginning of the year, but July saw a 5% rise in new enquiries. 

London remains the only UK region to see any house prices rises, with property prices in areas of the West Midlands and the East of England coming off much worse than in recent years.

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