Fri, 17 Jul 09
Price stabilisation is the phrase of the moment regarding house prices. This week’s property market news included latest house price figures released by the Department for Communities and Local Government that showed that UK prices fell by just 0.4% in the quarter ending May 2009.
This compares with a 4.8% fall recorded for the quarter ending February 2009 and suggests that annual house price falls are now edging closer to single digits and bodes well for owner occupiers in the market at least.
The average house price paid by owner occupiers in May was 11.6% lower than the previous year, according to the DCLG figures. However for first time buyers the annual price drop is much greater, at 14.8%.
This indicates that the price of flats and small terraced houses is still falling markedly, while the price of larger properties and family homes are indeed stabilising.
Across the board average prices in the UK in May were 12.5% lower than in the same month a year earlier, with the average home costing £188,991.
Commenting on these figures Royal Institution of Chartered Surveyors chief economist Simon Rubinsohn said: “This data provides further evidence that house prices appear to be stabilising. The May figures show that prices across the UK were essentially unchanged compared with April. Month on month, prices actually rose in Scotland and Wales.”
RICS own survey of surveyors added more weight this week to the argument that prices are stabilising.
The RICS monthly survey for June showed that more surveyors expected property prices to rise than fall for the first time since May 2007.
The figures show that 6% more chartered surveyors expected price increases than price falls in June, compared with 11% more expecting falls during May's survey.
Low availability of housing stock and increased interest among buyers is driving this optimism, RICS said.
RICS warns however that until mortgage lending conditions become more favourable it is unlikely that, “there will be a sustained upturn.”
Another to focus on house price stabilisation this week was financial experts Fitch Ratings – see Home News 15 Jul 2009.
Its latest report on European property and building markets says that house prices are beginning to stabilise but rents are set to fall by up to 15% by the end of the year.
Julian Crush, Senior Director in Fitch's Industrial group said: “Whilst UK property valuation decline is slowing and should stabilise this month, rents are generally predicted to fall by up to 15% in 2009.
“As a result, the UK rental market is becoming more difficult, with growing evidence of tenant defaults and rent arrears which could impact interest serviceability and hence ratings."
Further recent evidence of stabilisation in property sale prices has come from house price and asking price indices released by among others Home.co.uk and the Nationwide building society.
There has been one voice of pessimism though this week in terms of property prices. PricewaterhouseCoopers, in its latest economic outlook for the UK, has warned that further price falls are likely this year and into 2010.
Rising unemployment is one of the key factors for this pessimism.
The PWC outlook says: “Despite some recent reports of rises, we are not out of the woods yet and buyers should take a long-term rather than a short-term view."
Depressingly the report warns that even with five years of strong growth house prices in 2020 could still be lower in real terms than 2008 levels.
As well as stabilisation another relatively recent phenomenon in the property market is mortgage fraud, or more specifically fraudulent mortgage applications – see Home News 13 Jul 2009.
The Council of Mortgage Lenders says lenders have seen an escalation in bad practice such as exaggerating a salary in a bid to secure the best of the scarce deals available and to get around lenders’ increasingly strict lending rules.
CML spokeswoman Sue Anderson told The Times: “This is to do with fewer mortgage products, tighter criteria and an increase in demand. Lenders have become a lot more vigilant.”
Other examples of mortgage application fraud cited by the CML include failing to declare credit card balances or car loans.
Payment industry body Apacs says the recession has led many people to take such drastic action.
The lack of good mortgage deals is unlikely improve in the short term, according to the MPs who sit on the House of Commons Communities and Local Government Committee.
They branded the £50bn asset-backed guarantee scheme designed to reinvigorate the mortgage sector a failure and said further measures are needed by Government to boost lending.
This asset-backed scheme was announced in this year's Budget and provides guarantees on lenders' mortgage-backed securities. It was meant to help lenders sell on mortgages to investors and raise new money to lend to consumers. However restrictions on lenders and the types of loans the scheme covers mean it was, “doomed to fail.”
"In its current form the ABS is a leap that reaches across only half the chasm: impressive, but doomed to fail," added chair of the committee, Dr Phyllis Starkey.
By Joe Lepper
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