by Mark Johnston
Over 30 percent of estate agents are seeing a drop in house prices. August has seen a steady decline of up to eight percent compared to July. A report by the Royal Institution of Chartered Surveyors shows that the latest housing figures are the lowest since May 2009.
Stuart Allan, a Royal Institution of Chartered Surveyors member said: “There is a dearth of first-time buyers principally due to difficulties in obtaining mortgages and this has depressed the value of houses at the lower end of the market. These houses are typically selling for up to 10 per cent less than the estate agents advertised prices and this is reflected throughout the market. Vendors or property are required to be more realistic in their sale price expectations.”
Tom Goodley, another Royal Institution of Chartered Surveyors member added “There appears to be a lot of over priced houses on the market, and a shortage of buyers. The basic economics of supply and demand must prevail.”
One of the primary reasons for this decline is the low volumes of first time buyers entering the market. The number dropped in July to just thirty four percent which was down from thirty eight percent in June. This is the lowest amount since the financial crisis rocked the UK back in August 2007.
The Council of Mortgage Lenders has been tracking the decline and believe that first time buyer numbers on falling away due to banks and building societies firming up their balance sheets by making it harder to get a loan due to tight lending criteria. First time buyers now have to find an average of around 25% of the value of their home to even be considered for a mortgage and that’s before means testing and credit checks.
The Council of mortgage lenders also reported an increase in the number 0f people buying new homes from 52,000 in June to 56,000 in July although this is an improvement its just over half of the 100,000 a month reported a few years ago.
Howard Archer, economists at Global Insight, said: “This mortgage data for July remains very low compared to long-term norms and does little to dilute suspicion that house prices will remain under pressure. It is also notable that mortgage approvals to first time buyers actually weakened in July, which suggests not only that they may be becoming more reluctant to move into the housing market in the current uncertain economic environment. It also suggests that first time buyers are finding it hard to get mortgages.”
Nicholas Leeming, at the property website Zoopla.co.uk, said: “A crucial indicator of the health of the housing market is activity by first time buyers. The lack of attractive mortgage deals, combined with uncertainty around the economic impact of the government’s spending cuts affecting both lenders and borrowers, is seeing many frustrated first-time-buyers opt for renting in the short term.The mortgage market remains dominated by the cash-rich, with deposits on new homes increasing once again this month.”
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