Sixth Time Unlucky - House Prices Drop Again
Get the latest news on how the credit crunch is affecting the housing market.
It's good news for budding first-time buyers and bad news for existing homeowners again this week.
The latest survey by property valuation research company Hometrack has revealed house prices in the UK have fallen for the sixth consecutive month.
The company, which collects data on property valuations from surveyors, claims prices slumped 0.2% during March. This means the average cost of a home in England and Wales has shrunk to £174,100, while the annual growth rate has slipped to 0.4%.
Of course, the fact that prices are stagnating doesn't necessarily mean we are in for a crash. While growth is slow, it is still positive - and there have been improvements in the market since January.
Hometrack's report showed an increase of 1.2% in the number of new buyers registering with agents and a 4.6% rise in the volume of property listings. So, obviously, the British public's love affair with bricks and mortar isn't over yet.
What's more, properties being sold in March still achieved an average of 93.5% of their asking price - up 0.2% from February.
But then again, as asking prices are falling, the overall situation still looks quite bleak. According to Hometrack, nine out of the ten regions surveyed in England saw property prices decline, with the worst drops in London, the West Midlands and the North of England.
The Big Picture
Of course, this report isn't exactly a surprise - but it does make it easy to see how the effects of the credit crunch are now being felt in the housing market.
According to the Bank of England, the cost of mortgages for borrowers with small deposits has risen to a seven year high. Worse still, the range of mortgages available on the high street has fallen by more than half since last August.
Over the last month, several building societies have withdrawn their entire mortgage ranges and last week Nationwide, the UK's biggest building society, raised some of its tracker rates by as much as 0.57%. The British Bankers Association also reported that mortgage approvals fell by almost a third during February.
When it comes to supply and demand, the equation seems to me pretty simple: fewer competitive mortgage deals means fewer borrowers are able to afford to buy property. And this is pushing down property prices.
Adding to fears that the property bubble might soon burst, the Royal Institution of Chartered Surveyors (RICS) reported this week that the housing market slowdown is also affecting housing construction. Its first quarter survey reveals that growth in property construction workloads has fallen to its lowest level in more than a decade, as demand for newly-built properties falters. (And with good reason - see Avoid This Property Peril for more in-depth analysis on this topic.)
Unsurprisingly, anxiety about the property market is growing. A Nationwide survey shows that the public expects property prices to plummet a further 3% over the next six months, while a report from market research firm GfK NOP put consumer confidence at a 13 year low at the start of March.
While today's news will add fuel to the fire of the doom-mongers who predict a full-scale crash in house prices, I'm still reserving judgement.
After all, the only thing that's truly certain is that nothing's for sure.
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