News: Weekly News Round Up – House Prices Fall, Remortgages Rise, and the Value of the UK Housing Stock Reaches a Record Peak

Mon, 16 Aug 10

A report by the Halifax has revealed that the value of housing stock in the UK has increased by 118% in the last decade from £1.7 trillion to just over £3.7 trillion. This statistic has increased fears that the UK population is increasingly depending upon the property market.

To put the figure into perspective, the retail price index increased by just 29% over the same 10-year period. To illustrate the figure further, this staggering increase equates to around £33,000 per UK citizen.

Immense investment in the UK’s housing stock under the Labour government is often hailed as one of its strongest achievements. However, critics also see hefty property price increases as one of the causes of the global credit crunch and a driver of the current economic malaise.

A simple comparison between the retail price index increase and the rise in the value of the housing stock provides a clear indication of why so many first-time buyers face such difficulty stepping onto the housing ladder.  

Meanwhile, as the value of the housing stock boomed the Royal Institution of Chartered Surveyors (RICS) recorded the first fall in house prices for a year and suggested further falls could be around the corner.

The RICS UK Housing Market Survey revealed that eight per cent more surveyors reported a fall rather than rise in house prices – the lowest reading in more than a year. In contrast, last month saw eight per cent more surveyors reporting rising, not falling, prices.   

RICS spokesperson Ian Perry said: “This is a reflection of both the increase in supply following the scrapping of HIPS and the more cautious stance from buyers.”

Increased supply is illustrated by the average number of properties on surveyor’s books, which rose by 4.1% in June.

Perry added: “Significantly, the forward looking price expectations numbers suggest that this softer trend will continue through the second half of the year. However, agents are still generally optimistic about sales activity, which should benefit from more realistic pricing of properties.”

According to Home.co.uk’s latest Asking Price Index the number of properties that were reduced in price leapt from 74,000 in June to 92,000 in July. The mix-adjusted average asking price for homes on the market in England and Wales edged down 0.1% for a second consecutive month.
Meanwhile, this week also saw a rise in the number of new borrowers fleeing to the security of a fixed rate mortgage in June. It was the highest proportion so far in 2010, according to the Council of Mortgage Lenders (CML).

Fixed rates have been unpopular this year compared to recent years because the historic low bank rate made them less attractive. But with fixed rate prices falling, the trend has bucked.

CML said that remortgage lending also increased in June, although only modestly. With 27,000 remortgage loans worth £3.4 billion in June, the news appears to be positive compared with May when only 26,000 loans were approved worth £3.2 billion. However, in June last year, 34,000 remortgages (worth £4.2 billion) were taken out, charting an overall fall during the period.

And in its latest buy-to-let survey,CML shared some positive news, reporting that this previously shrinking portion of the mortgage market may be in modest recovery.

While buy-to-let lending remains subdued, says CML, the number of buy-to-let mortgages taken out in the second quarter rose by 13% from 22,000 in the first quarter to 24,900 deals. The value of buy-to-let lending was £2.4 billion, of which £1 billion was remortgaging.

The freezing up of the market was one of the most dramatic side effects of the credit crunch. However, this welcome news alongside a much-lower number of arrears cases in the buy-to-let market suggests a return to more stable conditions.

CML director general Michael Coogan said: “The buy-to-let market has continued to grow, albeit slowly, throughout the period since the credit crunch. And with fewer people able to afford the entry costs to home-ownership, as well as pressure on social housing, tenant demand for private rented property will remain strong.” 

In June, buy-to-let mortgages accounted for 12% of all mortgages – the highest proportion since records began.

See also: Asking Price Index, House Prices and Trends by Town and Postcode, Mortgages, Rental Search, Renting Guide



by Mark Johnson

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