The picture across the UK is varied but prices have fallen in eight of the 13 regions and essentially the UK housing market is divided between London and the rest of the country.
A raft of gloomy economic data prompted the Bank of England to keep interest rates on hold at 0.5% and after huge downgrades in forecasts for the UK’s economic growth, the chancellor said that spending cuts would have to continue beyond 2015, indicating that household incomes, especially in areas of the country heavily dependent on the public sector, would continue to be hit.
There was also a blow for first-time buyers, as stamp duty relief on offer for purchases up to £250,000 will not be extended past March next year.
A ray of light?But Mr Osborne also unveiled new measures to get the housing market moving – namely a £1 billion government guarantee for borrowers buying a new-build home. Under the scheme, lenders will offer 95% mortgages, but the developer and government will offer guarantees to cover 9% of the loan should the house be sold at a loss. The aim is to help 100,000 home movers or first-time buyers.
In addition, a £400 million fund to Get Britain Building is expected to enable 16,000 extra homes to be built, although while all extra development is helpful, it will go only a little way to address the structural long term shortage of housing in the UK.
Home sales in 2011 look likely to be at the lowest level in over 30 years and even lower in 2012The Council of Mortgage Lenders estimate that just 852,000 house sales are likely to go through by the end of this year, (less than half the number of transactions from the peak in 2006) which would mean house sales at their lowest since modern records began in 1978. They cite the prospects for the housing market in 2012 as ‘highly uncertain’ and predict that even fewer homes (just 825,000) will be sold in the UK in 2012.
The real mark of this housing slump is what's happening to the homes that aren't selling.
Properties that don't tick all the right boxes are sitting on the shelves unless sellers are willing to cut the price, and with low rates keeping forced sellers to a minimum many are just sitting unsold. When rates do start to rise these forced sellers will have to accept the realities of the market and may find themselves competing with other sellers made desperate because of unaffordable re-payments, and consequently struggle to achieve the price they could achieve whilst rates are still low.
Estate agents still report a stand-off between sellers and buyers, with the former reluctant to cut prices and the latter unwilling to pay over the odds. The message for 2012 being that home sellers must either have a desirable property to sell in an in-demand area or be willing to lower their expectations, if they want to get a sold sign up outside their house.
Extended period of slow growthThe substantial house price rises seen since the 1970s have reflected an exceptional period of time when mortgage credit expanded and this has now come to an end. Although some experts have predicted house prices will rise 15% by 2015 it would average out at 2.8 per cent annually – a far slower rate than the 1980s to 2000s period. Indeed if inflation remained stuck at its current high level, (5% on the Consumer Prices Index) house prices would fall in real terms.
Should you buy a home?The flipside to the lack of confidence and falling prices is that on the surface mortgages continue to get slightly easier to secure and borrowed money at the moment is cheap by historic standards. So if you can get a good deal and a good rate, now is a good time to buy provided you accept prices may dip in the short term.
You need to ask your online estate agency how long you plan to own the property and whether you are buying a home or an investment? If you do not buy your home the likely-hood is (especially if you have a significant deposit) you will pay more to rent an equivalent property and whilst you will not have the burden of the liabilities for major maintenance you will have to accept the property the way it is and live with all those niggling things you don’t like.
Even if prices came down another 10% in the short term, most people purchasing a home expect to be there for at least three years and it is widely accepted that by 2015 even if in real terms (taking into account the cost of inflation) the value of a home is slightly less, in straight numbers the value will have gone up.
The mortgage crunch and property pricesMortgages are the key to the property market. The vast majority of buyers cannot purchase a property without one and the price, availability and restrictions imposed by lenders have the biggest impact on their ability to buy a home. Likewise for a seller as it is worth bearing in mind that if say 90% of potential purchasers require a mortgage, that mortgage will be subject to the lenders own valuation. If they feel the price offered is too high, the lender will simply down value the property and the vendor will then be forced to accept a lower sum or loose the sale. Consequently refusing to market at a price which will be seen as fair by the market, could leave a vendor with very little chance of actually selling.
A fall in prices: Not everyone is upsetWhile falling property prices has brought tough times for those who have seen equity slashed, fallen into negative equity or even had their homes repossessed, there are others who are pleased that prices are falling.
Some experts argue that the UK's high house prices are a drag on its economy, hampering movement and encouraging boom and bust. Citing that the average home cost four times the average wage in 1983 but shot up to 8.5 times the average wage (£23,300) at the peak of the Halifax index in August 2007. They argue that narrowing the gap between property prices and wages would be a good thing.
The positive sidePessimists would have you believe that property in the UK is doomed, but this ignores the fact that housing is not stocks and shares.
Owning a home is an emotional desire, a must-have aspiration for most Britons, and the demand for property in Britain remains high. For some time now government targets and planning guidelines have focused on quantity rather than quality, leaving a shortage of decent sized family homes in popular areas. Given the overall shortage of supply, although prices may have fallen by 20%, many potential buyers now see this as a good purchasing opportunity.
Unlike most other commodities people have no choice but to pay for a home, they either do so as a tenant or an owner, both have their drawbacks, but with prices coming back towards a more affordable ratio against earnings and rents at an all-time high, 2012 could be a good time to take the plunge.
Message to sellersThe message to sellers already on the market has to be, if you have not been receiving serious interest from buyers, (and don’t have your hopes riding on someone who has told you they will pay your price when they have sold theirs) get your price down.
For those sellers about to enter the market, be realistic. Do your homework, don’t just look at asking prices in your area as that could just mean you join the going nowhere club. Consider also sold prices and don’t allow agents, desperate to list your house, to flatter you with unrealistic values in exchange for a signed contract. Accept that if one agent is over-valuing the others may feel they too have to in order to stand any chance of having stock to offer.
Look for examples of sold properties – Zoopla is a useful site with past brochures available to view and if needs be, drive out to see comparable properties in their situation.
With good presentation (and nowadays that means being on all the major property web portals) an agent that is easily contactable by potential purchasers (9am -5pm simply is not good enough for today’s consumer) and the price realistic, there is little reason to believe you will not attract a buyer in 2012.
From the top online estate agency on the internet