Property Prices Look Set For Further Falls
The latest industry figures show that property sales are continuing to fall....
The latest property figures have been released today. Overall it looks like property prices will continue to fall for a while.
According to the latest survey from the Royal Institution of Chartered Surveyors (RICS), the average number of property sales fell again in October, as a lack of mortgage finance continued to prevent buyers from accessing the market.
Over the last three months, the average number of sales per surveyor has dropped to 10.9, the lowest level since records began in 1978. London remains at the bottom of the activity league, with just 6.4 sales per surveyor on average.
However, some estate agents are becoming more optimistic - sales expectations have hit their best level since March 2007. 20% more chartered surveyors expect an upturn in sales over the next three months, up from 4% in September. Sellers are said to be reducing asking prices to realistic levels and cash rich investors are searching for investment opportunities.
First-time buyers still finding it tough
Unfortunately figures from the Council of Mortgage Lenders (CML) reveal that first-time buyers are still finding it hard to get on the property ladder, with only 13,400 first-time buyers entering the market in September, as opposed to 28,200 a year earlier.
First-time buyers also borrowed less in September, borrowing an average of £104,500 compared to £108,000 in August. The amount borrowed has been steadily declining since peaking at £119,250 in July 2007.
First-time buyers, who normally don't have large deposits, have been particularly badly hit by the credit crunch. If you have a low loan-to-value (LTV), say 60%, you can still get a good deal. But if you only have a small deposit and a high LTV (say 95%), you'll find it much harder to get a good deal compared to two years ago.
Overall, RICS believes further property price falls are likely. Of course, falling house prices are good news for some people. If you're a potential first-time buyer or thinking of trading up, lower prices are good!
More: The Right Mortgage: Discount Vs Trackers | How Will The Rate Cut Affect Your Mortgage
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peepobaby - I think you mean when unemployment stops rising.[br/][br/]Also, are you saying that lenders are offering mortgages normally, but borrowers aren't seeking to take out loans because of, say, perceived risk, or unemployment, or the rates are too high compared to heir incomes? Because just about every other commentator I can think of says that it's not a question of high prices/rates, but lenders simply choosing not to lend, full-stop, to anyone except those with the highest credit rating and relatively huge (25% minimum) deposits. The excuse used for the high rates is that interbank lending is much more expensive than base rates.[br/][br/]The borrowing public, however, simply feels they are being ripped off: we have 3% base rates yet the best fixed-rate deals you can get are around 6.5%! Do mortgage providers have *no* savings funds to call on, instead of using the credit markets?
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Just follow the unemployment figures. When unemployment stops falling, the property market will be 6 months away from the bottom. The regional breakdown will give the regional picture.[br/][br/]As for credit markets, they work perfectly well today. I work in them, Three months ago they didn't. Now they are working well but there isn't much lending because lenders have realised that the risk is high and have put up their prices/rates!
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guest:[br/][br/]"But if house prices are falling at a rate of 15% per year, and average LTVs are dropping, shouldn't the average first-time buyer's borrowing be falling by more than 15% ???"[br/][br/]Not necessarily. There are also far fewer FTBs (less than half) entering the market and presumably the ones that aren't entering the market are those that can't afford it, either because of a poor credit record or lack of savings. That means that the pool of FTBs is probably generally wealthier and smaller than the pool from a year ago and would explain why the average LTV hasn't fallen as far as house prices. It probably just means that the profile of the average house being bought for the first time is different (or in a different location).[br/][br/]Obviously there are variations by region, but from a glance through Nationwide's latest reports it's clear to see that prices are slipping in just about every region in the country and will likely continue to do so with credit markets (which affect everywhere) bunged up and the economy falling into recession.
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17 November 2008