Housing market still mired in uncertainty
The slight increase in UK house prices over the last few months, while an encouraging sign that they may have bottomed out, is not indicative of any genuine recovery yet.
[UKPRwire, Wed Sep 23 2009] The slight increase in UK house prices over the last few months, while an encouraging sign that they may have bottomed out, is not indicative of any genuine recovery yet.
The economic forecasters Ernst & Young Item Club have referred to the rise as a “false dawn” and warned that house prices will not return to their 2007 peak for at least another five years. The Club is among a number of commentators arguing that the recent upturn in prices should be seen as an atypical blip in the market rather than a continuing trend.
Backing this view is the fact that many homeowners are trapped in negative equity or still unwilling to sell until they are convinced that prices are really on the rise. For while the fall in prices that began two years ago seems to have turned around, there is no consensus as to whether they are really rising in a prolonged way. Indeed the country’s two largest building societies, Nationwide and the Halifax, are not even agreed on whether house prices are significantly higher (£7,000 higher, says Nationwide) or haven’t changed much at all (according to the Halifax) since the start of the year.
On the lending side, the latest figures from mortgage lenders show an increase in loans granted for house purchases – the number of such loans in July this year was 19% higher than in July 2008, according to the Council of Mortgage Lenders (CML), representing the “first material annual growth” since early 2007.
But while lending for house purchases is increasing, “there are still constraints affecting the lending industry’s capacity to fund increased lending”, as CML’s economist Paul Samter pointed out. Banks are still keeping a tight rein on their lending, making things very difficult for borrowers and especially for first-time buyers, who still have to find an average deposit of 25%.
And fewer first-time buyers, who typically buy cheaper properties, has implications for those wanting to trade up, creating a bottleneck in the market which will depress the level of transactions taking place.
“All factors considered, house prices are unlikely to experience genuine recovery until wider economic factors become more favourable, particularly the loosening up by banks of lending criteria for house mortgages,” said Lawrence Smith of Decision Homebuyers. “The small increases in house prices we’ve seen over the summer will have cheered up homeowners, but there’s no guarantee the trend will continue without further dips.”
For press enquiries, please contact Phil Rendall on 020 7099 9026
News provided by Decision Homebuyers, a leading UK property company offering a quick and simple solution for selling your home, no matter what the condition.
Decision Homebuyers carries out daily surveys of the national media to provide up-to-date news and commentary on the UK property market.