Money News
House prices fell for the seventh month in a row in April, according to the latest national housing market survey from Hometrack, the housing intelligence business.
Average prices were down across half (51%) of the country with the average fall being 0.6% over the month. The annual rate of 'growth' has now slipped to -0.9%, the lowest level since January 2006.
While agents reported a small increase in both applicant numbers and sales agreed over February and March, the latest survey shows a reversal in both these trends. Fewer sales over April combined with a decline in applicant numbers explains the larger price falls this month. For the sales that took place over the month the average time to sell reached 9 weeks compared to less than 6 weeks a year ago - unrealistically priced properties facing a pronounced sales period in the current market.
The underlying weakness in pricing levels is highlighted by the decline in the proportion of the asking price being achieved. A year ago vendors were achieving 95.7% of the asking price but this has now fallen to 93%, the lowest since January 2005 when it was 92.7%. On a regional basis the proportion of the asking price being achieved has fallen the most in London - from 97.4% a year ago to 92.9% today.
The latest survey shows that with the spotlight focussed on the mortgage and housing markets there is an increasing uncertainty and weaker confidence among those households who may have considered moving home in the first half of this year.
"While the availability of finance is impacting on demand in certain segments, the reality is that weak confidence is effectively resulting in a 'buyers strike' with households sitting on the sidelines and waiting to see how events unfold," comments Richard Donnell, Hometrack's Director of Research.
He adds. "As we predicted last year, transaction volumes will be the big casualty and there now seems the prospect of a record low in residential sales volumes in 2008."
Donnell further notes that the factors impacting on the market today are very different from the 1990s when households were effectively forced to withdraw from the market for economic and financial reasons. The current weakness in demand today is largely confidence driven - the fact that the majority of house moves are 'aspirational' rather than 'need' based is only exacerbating the problem.
There is evidence that some households see the current uncertainty as an opportunity to get a better deal by making a low offer which, in a growing number of cases, is being accepted by some nervous vendors. This process could well result in a relatively rapid adjustment back to more realistic pricing levels. Those households sitting on large capital gains and who want to move appear increasingly willing to take a hit on their equity and accept a lower offer. However, it must be remembered that any price reduction will need to be passed further down the chain.
On a regional basis prices were down over the month in all regions with the falls ranging between -0.5% in both the North and North West and -0.8% in East Anglia and the West Midlands. The slightly lower falls in the northern regions are down to the fact that these markets have been going through a re-pricing process since 2005.
The stronger market conditions over 2006 and 2007 were largely a London phenomenon and this market is now slowing rapidly off a high base with prices down -2.2% over the last 6 months.
Looking ahead, Donnell argues that the current downward pressure on prices will only start to be reversed once there is a turnaround in buyer confidence, the timing of which, is almost impossible to predict but will revolve around greater stability in the financial markets and an improved economic outlook.
28 April 2008 © Moneyextra.com
Moneyextra.com recommends you should consider taking independent financial advice before acting on any article. Please contact us for help with your individual circumstances if any assistance is required.