by Mark Johnston
House prices fell 0.6 percent in August, this more than reversed July’s rise and surprised economists who expected them to stay flat.
Nationwides chief economist, Martin Gahbauer suggests that; “the three months rate of change fell from 1.2% in July to 0% in August, suggesting that house prices have essentially stagnated over the summer.
Economist uncertainty, a lack of home loans and expectations that prices will fall further have combined to create a sluggish market.
The average number of sales per survey over the last three months fell by 1.4% a 26 month low.
Mortgages are the key to the property market. The vast majority of buyers can not purchase a property with out a mortgage and the price, availability and restrictions imposed on these have the biggest impact on their ability to buy a home.
The biggest problem with the housing market at the current time is economic uncertainty followed closely by a lack of mortgage availability.
Many British has price measures suggest that the housing market has been flat or in some opinions modestly falling during 2011. Most economists now expect prices to edge lower still during the rest of the year as Britain’s sluggish growth, high inflation
And low wage growth continues to erode buyer’s confidence.
A recent decline in average mortgage rates has further boosted home affordability as long as borrowers can raise decent deposits to make a new purchase.
Overall economists expect broad stability in both prices and activity over the coming months.
With the latest housing market news shows a drop in prices home sellers must either have a desirable property in a in demand area or be willing to lower their price expectations, if they want to get a sold sign up outside their home.
Many forecasts suggest that when there is a turning point in the economy this could go either way the mortgage market easing would bump prices up, interest rates rising or a fresh dose of unemployment would send them down.
What’s next for house prices?
Rightmove say asking prices will slip in 2011 and predict a 5% fall over the year, while Royal Institute of Chartered Surveyors (RICS) forecast a 2% fall in house prices in 2011, but says property will not dip by more than 5% and Howard Archer, chief UK economist at analysts IHS global insight suggest prices will be 10% lower than their mid 2010 levels by the end of 2011.
The big potential stumbling block for the property market are interest only mortgage crackdowns with lenders making it much tougher to take out cheap interest loans, which have helped prop up the property market and the other is that lenders face a mortgage crunch as they are still cash strapped, this year is a crunch year for lenders in terms of refinancing their debts.
The cost of moving is also sky high, for example a family buying a modest property that costs more than £250,000 face a stamp duty bill of £7,500,then add estate agents and solicitors fees and this can easily set a family back £15,000 or more. This is of course with out even adding the extra 25% add more deposit now need to secure at most.
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