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News: Weekly News Round Up - Confidence Dips As House Prices Fall

Sat, 10 Jul 10

Confidence among the public and property experts in the housing market is falling away.

According to property website Zoopla’s latest Housing Market Sentiment Survey less people believe that house prices will continue to rise during 2010.

The latest survey found that 78% of respondents believe prices will rise over the next six months, down from 81% three months ago.  Of those that are expecting house price rises during 2010 the average growth mentioned was 5.5% from July until the end of the year.

Nicholas Leeming, commercial director of Zoopla.co.uk, said: “The dip does signal a directional shift as concerns are building again around the outlook for the property market.”

He added that the public is also concerned about the continued lack of availability of mortgages and a fear that interest rates will rise towards the end of the year.

A quarter said they were worried about possible interest rate rises and around a fifth believe public sector job cuts and pay freezes will damage the property market, the Zoopla survey also revealed.

Leeming added: “The fear remains that the revival in the housing market will be derailed unless the banks make a concerted effort to increase lending."

Another to be concerned about the state of the property market is housebuilder Persimmon.

Despite unveiling an upbeat trading statement, showing an increase in the number of homes it has sold since the start of the year, chief executive Mike Farley said: “We remain cautious in our investment decisions until mortgage availability improves further. It has improved, but it has got a long way to go.' He added that one of the main constraints is the size of the deposit lenders are demanding.

It is perhaps unsurprising that confidence in house price rises is falling away, given the release of more house price indices this week showing prices are at best flattening out and in some areas are falling.

Latest figures released by Halifax show that house prices fell by 0.6% between May and June.

The lender’s latest House Price Index also shows that the annual rate of growth in prices is now 6.3%, which is down on May’s figure of 6.9% and below October 2007’s peak of 8.9%.

Halifax housing economist Martin Ellis says these latest figures are a further indication that prices are flattening out due to an increase in supply.

He said: “This pattern is in line with our view that house prices will be broadly unchanged over 2010 as a whole. A shortage of properties for sale in 2009 contributed to an imbalance between supply and demand and was a key factor driving up house prices last year.  An increase in the number of properties available for sale in recent months has helped to reduce the imbalance, relieving the upward pressure on prices.”

Home.co.uk’s latest Asking Price Index also shows that prices are flattening out. The mix-adjusted average asking price for homes on the market in England and Wales increased by just 0.3% in the month leading up to its June report.

A dip in prices was also recorded in the latest house price index released by Acadametrics and LSL Property Services.

This shows that house prices fell between June and May by 0.5%. Acadametrics and LSL say that the increase in supply has given buyers more power to demand reductions on asking prices. The index adds though that the “oversupply in the market” is now reducing.

The annual rate of growth is now 7.7%, down from a 9.1% annual rise recorded last month. Housing market transactions are up, by 20% from 52,975 in May to 63,500 in June.

David Newnes, managing director of LSL Property Services estate agency division, which owns Your Move and Reeds Rains, said: “June’s transaction figures are the highest this year and suggest last month’s stalemate between sellers and buyers failing to agree terms is on the wane. We can’t discount further house prices falls over the next few months, as the market continues to stabilise and normalise.

“However, the demographic age profile of the UK suggests there is an army of over one million would-be first-time buyers delaying purchases, who are ready to enter the market when conditions allow. This suggests the current drop in house prices may well be short lived.” He also called for better mortgage deals to help first-time buyers.

This week the Consumer Financial Education Body (CFEB) urged  borrowers to ensure they properly understand the details of their deal and how a rise in interest rates may affect them.

Its survey of more than 2,000 people found that 74% did not know how much a 1% rise in interest rates would affect their household budget.

One in seven said they did not know when their current mortgage deal expires and the same proportion did not know whether they are paying a fixed, standard, variable tracker or discounted rate mortgage.

The Bank of England’s monetary policy committee announced this week that it has kept interest rates on hold at the record low of 0.5%.

 

By Joe Lepper 

See also: Asking Price Index, House Prices and Trends by Town and Postcode, Mortgages, Life Insurance and Mortgage Protection Guide

 

 

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