News: Weekly News Round Up - House Prices Begin To Fall In Some Regions

Fri, 04 Jun 10

Further evidence has emerged that house prices are stagnating across the UK and even falling in some regions.

The Land Registry says that prices rose by just 0.2% between March and April in England and Wales.

It adds that the annual increase in prices is still buoyant at 8.5%, but these latest monthly figures suggest that prices are unlikely to increase further – see Home News 3 Jun 2010.

In Yorkshire and Humber prices are already beginning to fall. The year-on-year price rise in the region is now just 0.7% and between March and April prices fell by 2.2%.

Other regions could follow, latest asking prices figures suggest. In the month leading up to Home.co.uk’s May Asking Price Index report the mix-adjusted average asking price for homes on the market in England and Wales fell by 0.2%. Latest figures from the Halifax also show that prices are beginning to fall slightly. According to its latest monthly survey prices fell by 0.4% between April and May. The Halifax says that the annual rate of growth  in April was 6.6%.

Martin Ellis, Halifax housing economist, said these latest figures are “in line with our view that house prices will be flat during 2010 as a whole."

An increase in supply as buy-to-let landlords look to sell up and sellers take advantage of price rises during 2009 are key factors in this latest price stabilisation.

The increase in supply is already affecting the number of house sales taking place. The Land Registry added says that during February this year there were 40,502 sales, an increase of 49% on February 2009’s total of 27,190. These are the latest sales figures the Land Registry has made available.

Mortgage lending is also up, according to the Bank of England.

Between March and April the number of mortgages approved for house purchases rose from 49,008 to 49,871. This is a rise of 2%.

Commenting on the latest Bank of England lending figures, David Whittaker, managing director of Mortgages For Business, said: “The latest lending figures show a slight improvement but progress will be slow this year. With government austerity measures about to be imposed we won’t see the mortgage market improve radically over the next few months. But we won’t see lending fall dramatically either. It’s not going to be a golden year but it could be a lot worse.”

CML's director general Michael Coogan added: "So far this year, house purchase activity has been lower than in the last half of 2009, although this reflects the stamp duty holiday, which boosted activity towards the end of last year and caused the quiet start to 2010. “Meanwhile, although lower interest rates are benefiting borrowers, they are removing the incentive to remortgage, which is also bearing down on the lending figures.”

He also called on the government to ensure the forthcoming Budget prioritises support for homeowners, but he conceded that “the fiscal position leaves only limited room for manoeuvre.”

Prices could be hit further in the coming months with buy-to-let experts predicting a more rapid increase in the supply of homes for sales as landlords look to sell up before the government raises capital gains tax.

The coalition government has said it plans to raise the tax on non-business capital gains from its current 18% level to "similar or close to those applied to income". It is believed that this could mean the tax rate for people selling a second home could rocket to as much as 50%.

According to a survey by LSL Property Services 26% of landlords plan to leave the sector and put their homes on the market before the new tax is introduced. The vast majority of landlords surveyed (90%) oppose the tax hike and seven out of ten landlords will now reconsider their future investment in property.  
Simon Embley, CEO of LSL Property Services, said:  “Foisting a tax-hike on property investors will drive many from the housing market – at a time when its recovery is still perilously fragile. If potential landlords are discouraged from investing, we will see a large proportion of the demand for house purchase disappear, and house prices may fall. A further fall in house prices will see more home-owners in negative equity potentially triggering a significant rise in repossessions as owners lose confidence in the market” 

LSL added that under the new tax proposals, long-term investors would suffer the most. It says that the average house price has risen from £44,880 to £168,202 over the last 20 years.  This means that an investor who bought in 1988 and wanted to sell would be liable for tax on 40% of £113,222 .  As a result, an investor who bought twenty years ago as part of a retirement strategy, will face a tax bill of £45,288.

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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