Falling House Prices Bring Out Potential Buyers
Lower house prices have triggered an increase in `new buyer enquiries' for homes. But that doesn't mean the property market has hit bottom.
Property website, Rightmove, said today that enquiries by potential new home buyers have jumped 108% compared to a year ago. The Royal Institution of Chartered Surveyors (RICS) has announced similar figures showing that new enquiries have risen for the last three months.
These surveys follow Halifax's claim earlier this month that house prices rose in January.
Recovery?
Regardless of these numbers, I still think that house prices will fall further this year.
For starters, Rightmove says that some estate agents are reporting 40 to 50 viewing per weekend with no resulting offers.
Secondly, the mortgage market remains tight - especially for first-time buyers who only have small deposits. If you can't get a mortgage, you can't make that crucial first step onto the property ladder.
And, most importantly, the economy is still getting worse. Only last week Mervyn King, the governor of the Bank of England, said that the UK was in a `deep recession.' He thinks the economy will be contracting at an annual rate of 4% later this year - and it could be worse than that. With that background, further rises in unemployment are inevitable which will impact on house prices.
So what should we do?
If, like me, you're happy in your current home, it makes sense to batten down the hatches and wait until the storm passes.
If you're looking to buy your first home, or move upmarket, there's no harm in scouting the market and getting a feel for what you can get for your buck.
However, I think it makes sense to hold off making an offer just yet. You never can be certain about these things, but I strongly suspect that house prices will be lower in six months' time.
> Get free mortgage advice from a broker at our mortgage service.
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Chasbmw: Nationwide puts out a great site for this stuff, pretty much confirming your experience: http://www.nationwide.co.uk/hpi/historical.htm It requires a little fancy footwork to find what one wants but it's well done. Compared with average UK house prices in 2008 Q4 of about £157,000, average real prices in 1988 were about £102,500; in 2000, about £99,700. The average annual increase in average real UK house prices since 1975 Q1 to 2008 Q4 is 2.9%. Over this 33 year period there have been three slumps in real prices, each of increasing severity. The present slump has only just begun, but the initial rate of decrease in prices seems to be steeper than in any of the three previous slumps. The last slump began in 1990 Q4 and real prices did not recover until 2002 Q2. It pains me to predict that the present slump will be at least as severe as that one, and quite possible severer, owing to the banking crisis and the credit crunch. Average real UK house prices reached their zenith in 2007 Q3: £192,500. On the basis of Chasbmw's info and the Nationwide's excellent stats, it will be 2020 before real prices recover to that level! Ouch!
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supsap, The last housing bust started in 1988 and went on until 97ish. I know I lost my job as a surveyor in 1990! and my house which was 'worth' around £220K in 88 sold for £160K in 1991 a 27% drop. I think that you will find that in inflation adjusted prices *(important to do so as inflation was high during the period) that 1988 prices took until 2000/2001 to recover.
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for BOW read BOE
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19 February 2009