Thu, 14 Aug 08
Too much can be made of regional differences when analysing house price figures. The reality is far more complex and often the type of property rather than where it is can be a better reflection of whether its value will hold steady or fall in troubled times.
Latest Department for Communities and Local Government (DCLG), show this clearly- see Home News 13 August. It found that the value of flats plummeted, by 3.6% from May to June, while the price of bungalows and detached homes held steady during the period, increasing by just under 1%.
A key factor is the growth in the number of flats in recent years and decline in house building, as developers sought to take advantage of the house price boom, carving up houses and cramming as many homes as possible onto development sites.
A few years on and the single people and young couples that moved in are that bit older, may now have children and certainly dream of more space and even a garden.
These reluctant flat owners are now prepared to take a big discount on their homes to get more space, meanwhile those in sought after larger homes can almost sense flat owners’ desperation. As a result they are far more reluctant to lower prices.
The DCLG figures show that although semi-detached homes and terraced house prices also fell during the period, they were only by 0.9% and 0.3% respectively, far less than the slump in the price of flats.
The CML revealed that first time buyers now have to stump up a deposit in the region of 22% to even get a foot in the door of leading lenders. This means many potential first time buyers are priced out of the market, left to continue playing their waiting game.
RICS found that across the board the housing market is at a virtual standstill, with first time buyers, “rapidly becoming an endangered species”, according to the institution’s spokesman Ian Perry - see Home News 12 Aug 2008.
The number of people buying homes is at its lowest level for 30 years, RICS found, with just 14.4 completed sales per surveyor on average during July.
This lack of opportunity for first time buyers to enter the market should be leading to a windfall for private landlords as demand for rented accommodation soars.
But research by AXA found that while landlords have been reaping the rewards in recent years the good times may be at an end - see Home News 11 Aug 2008.
The simple truth is that those renting can no longer afford high rents, leaving the prospect of arrears ever more realistic.
AXA’s research found that 13% of renters have already fallen into arrears in the last 12 months, with over half of these in the three months to July this year.
Around 50% of all those surveyed also told AXA that they are increasingly concerned about being unable to afford their rent.
AXA’s conclusion is that rents must come down to help renters and avert the prospect of arrears.
Mike Keating, Managing Director of Personal Lines Intermediary at AXA said: “On the surface of it, this looks like the rental market should be buoyant. But if you consider that many of those renting may be struggling to make ends meet it's certainly not all good news for buy-to-let owners.”
One piece of good news did emerge in all this gloom. The cost of fixed rate mortgages is coming down, Bank of England figures revealed – see Home News 13 Aug 2008.
This could help some potential first time buyers afford a home. But a closer look at the findings show that the drop in the average deal is negligible, of just 0.2% to 6.3%, and then only for those with a 25% deposit, which very few first time buyers have.
It looks like the problems for the housing market and flat owners in particular are set to remain for the foreseeable future.
See Also – Asking Price Index
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