by Mark Johnston
The UK housing market has witnessed months of relatively low activity. Figures from the HM Revenue and customs show that approximately 10,000 fewer homes were sold in July 2011 than in the same month last year.
The Halifax’s latest report on the property market shows it is ‘lacking direction’ at the current time.
Property prices in England and Wales were 0.3% below their level this time last September. This roughly means that the value of the average property in September 2011 is £166,256, up only slightly from £165,914 in August 2011.
Sluggish demand for homes on the back of weak labour market conditions, combined with only a gradual rise in the supply of available properties has helped keep property prices fairly stable.
Despite many experts previously predicting that the market would hold up for the rest of the year, it looks like the global economic backdrop poses a risk on property prices.
Many believe that mounting concerns over the euro zone debt crisis has generated significant volatility in financial markets recently.
There is risk that as the euro zone situation continues to deteriorate; it could affect the cost and availability of credit. However the recent measures by the bank of England and other central banks around the world to made additional funding available to banks should limit the risks to credit supply.
Howard Archer from HIS global insight suggested “the current financial market turmoil and heightened concerns over the domestic and global economies are unlikely to do much for consumer confidence and willingness to commit to buying a house”.
Financial experts have forecast house prices on a whole to fall by at least 5% from current levels by mid 2012, as poor economic fundamentals outweigh extended low interest rates.
Richard Donnell, a research director suggests that “as the gap between supply and demand widens, we are likely to see an acceleration in the level of price falls as we head towards the end of the year”.
A sharp fall in the number of new buyers and a rise in the gap between asking prices and actual selling prices point to a deepening recession in the housing market.
According to the council of mortgage lenders (CML) lending figures many potential home buyers are adopting a ‘wait to see’ approach, whether the economy will stabilise or if interest rates will rise, before they commit to purchase a new home.
With this in mind many believe that at home alterations and upgrades will increase as many home owners decide to stay put in their current properties. Choosing to upgrade, repair and makeover elements of their houses and gardens in hope that things will change and this will give them better hope of selling their properties in the future.
The only people to gain from these stagnant house prices are of course the buy to let landlords.
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