New home prices in the UK dipped again last month as the housing market struggles to throw off the after-effects of a year-long slump, says property website smartnewhomes.
The average price of a new home in the UK was £255,327, down 2.4% on the same time last year and a further marginal decrease of 0.2% from the previous month according to the website’s latest report.
Moreover, it argues, although the worst of the downturn in house prices looks to be over with annual inflation now at -2.4% compared to -8.0% at its lowest point in spring this year, continuing negative quarterly inflation would indicate a return to the strong positive growth rates of the last few years is some way off.
Average new home prices in London, the South West, West Midlands and the North suffered the worst of the wider market slowdown, whilst East Anglia and Wales saw prices rise. Measures of migration between regions in the UK show a seasonal slowdown in the ongoing exodus to both the South West and Scotland although both remain popular regions, whilst the West and East Midlands have fallen further out of favour with homebuyers.
David Bexon, managing director of smartnewhomes.com, says: “It has been a difficult year for the UK housing market, reflected in new home price inflation and activity. Although the market is certainly out of the woods and the likelihood of a crash recedes significantly every month, it is still in a delicate state with buyers acting cautiously, slowing down activity across the board. This situation is unlikely to change much as we approach the festive season but once the New Year is upon us, it is quite likely that buyers and sellers will have been reassured by the market’s stability and we could see prices begin to edge once again.”
This view seems to be support in the wider market as according to Propertyfinder.com’s October survey, also published today, the housing market is set for a sustained recovery in the New Year.
The survey claims 54% of respondents expect house prices to rise over the next 12 months, signalling the recent recovery in volumes of transactions can be sustained.
In London and the South East 61% of respondents now expect prices to rise.
Confidence leads trends in transactions by three to four months and as a consequence of the improvement in buyer and seller optimism, transaction volumes have also increased, says Propertyfinder. In the past two months buyers’ and sellers’ expectations for the market have converged, with both sides now concurring that house prices could rise by 0.5% over the next 12 months.
Transaction volumes are up by 3% on this time last year, when buyer/seller opinions were much less unified, the survey claims.
Buyers in October on average made offers 6% below the asking price, while sellers are currently prepared to accept offers 5.5% below their asking price. With buyers and sellers now closely matched, the potential for sales to be agreed is much greater.
This renewed confidence is reflected in part by homebuyers’ willingness to stretch themselves a little bit more in order to borrow enough to afford the property they wish to purchase, says the research. People are now borrowing on average 58.5% of the value of the property, up from just 54.0% at the beginning of the year.
Jim Buckle, managing director of propertyfinder.com says negative sentiment regarding the future of house prices and a cautious approach to borrowing led to the number of transactions falling sharply but that confidence has risen during the autumn.
Buckle says this renewed upwards momentum, combined with the expectation that the financial services industry will be paying big bonuses this year, heralds a strengthening of the housing market into the New Year.
The reason most commonly given why property prices will rise is that people moving into their area will create increased demand, mentioned by 26.5% of respondents. Expectations that interest rates will be cut again was cited by just 20.4% of respondents. This marks a sharp decline in the groundswell of opinion, says the report, expecting an interest rate cut compared with July (37.6%) and August (47.9%), the month in which an interest rate cut actually occurred.
Buckle adds: “At a time when homebuyer confidence is running high, a cut in rates could be just what the doctor ordered to spur the market forward. We don’t expect rates to be cut this week, and home buyers are clearly not banking on one, but still think there is a strong likelihood that the monetary policy committee will act to lower the cost of borrowing early in the New Year.”
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Matthew West on 020 7484 9893 or email [email protected].IFAonline
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