by Mark Johnston
The United Kingdom coalition government has made an immediate impact on the property market with measures that quickly weaken United Kingdom property prices.
The recession may be formerly over, but with big government spending cuts in the pipeline unemployment is likely to rise. With government cuts starting to filter through as the United Kingdom tries to balance the books, it will mean public sector job losses, higher taxes and therefore a dip in confidence.
Reports have shown that house prices on the whole have shown remarkable resilience even with low consumer confidence and a struggling economy. However the concerns over a fresh bout of recession could test this further.
Overall forecasts for the property market are gloomy with house prices due to come under yet more pressure with expectations of prices to fall rather than rise over the next 3 months.
One major issue with most house price analysis currently is the data does not always reflect what’s really happening as there is very little activity and very few sales taking place.
Some estate agents are reporting an increase in new instructions, therefore supply of property may rapidly outstrip demand and this over supplying the property market could send property prices downwards sharply.
New data currently out has seen the number of buyers enquires fall and the number of completed sales collapsing towards a low not reached since 2007.
The dramatic slump in property prices in 2008 to 2009 came as lenders turned off the mortgage taps, deposits were hiked and mortgage rates rose according to the Council of Mortgage Lenders (CML)
Figures for house purchase mortgages completed in May were 41,500 the lowest seen since the property crash in 2009.
Prices paid for houses by first time buyers were 2.1% lower on average than in May 2010 and prices paid by former owner occupiers also decreased by 1.4%.
According to home track house prices have dropped by 3.9% over the past year, further falls are set as sellers become more realistic about the value of their property.
The average property owner to date has lost just under £1,900 on their property since January 2011.
For house prices to rise two things are required either high wage inflation or relaxed lending, however the banks are not likely to risk lending to high risk customers with little or no deposit.
Falling property prices have brought tough times for home owners who have seen their equity slashed, fallen into negative equity or even had their homes repossessed.
Research suggests that high house prices can be a drag on economy and hampering movement. If the gap between property prices and wages was narrowed it would make buying a home less of a gamble.
Overly high property prices undermine economic productivity as it prevents people moving to areas of employment.
Low property prices are a positive for first time buyers and those moving up the property ladder, but only if they can raise the substantial deposits needed.
Latest views for 2011 are that interest rates will be kept at a low rate of 0.5% until around October 2011 when they may slowly rise, although no bank will attempt to raise interest rates until they are positive of the outcome.
Howard Archer, chief economist for (IHS) global insight said he continued to believe that house prices will fall by around 5% from current levels by mid 2012.
Story link - Resilient House Prices As Economy Slows
Related stories to : Resilient House Prices As Economy Slows