House prices declined sharply in August
The value of properties being put up for sale fell across England and Wales last month, according to the online property portal Rightmove.
Typically, the market is a little subdued during August, but this year saw a fall of 2.9 per cent. That equates to taking £7,758 off the value of the average home.
Rightmove said it is the largest decrease it has seen for this time of the year since it was launched back in 2000 and could signal that a further decline is on the horizon. London saw the largest fall, recording a drop of 5.9 per cent.
Despite this news, asking prices are still 5.3 per cent (£13,202) higher than they were 12 months ago due to significant increases during the first half of 2014.
Mile Shipside, Rightmove’s director and housing market analyst, said most vendors understand that potential buyers are “thinner on the ground” during this time of year and are merely attempting to make their properties more appealing by offering cheaper prices.
He feels that people looking to buy could find themselves a bargain because sellers are keen to sell at a time when buyers are becoming a “scarcer species”.
Mr Shipside added that both buyers and sellers may be particularly cautious going forwards because they believe that the cost of mortgages is set to rise while availability is falling due to new Financial Conduct Authority regulations launched as part of its Mortgage Market Review.
Indeed, new figures from the Bank of England show that mortgage approvals fell from 67,563 to 66,569 during July. Numbers were up in June, but it was the first increase for five months and followed May’s ten month low.
Despite this reduction in approvals, the amount of money borrowed rose to its highest level since 2008. During June the total value of mortgages completions stood at just over £2 billion, but in July it had soared to £2.3 billion.
Henry Pryor, an established high end estate agent, told The Daily Telegraph that the market is now being driven by wealthy people buying at higher values rather than a large volume of mortgage applications.
He also stated that, in his opinion at least, the Mortgage Market Review was a kin to using a “hammer to crack a nut”
It is also felt that Mark Carney, governor of the Bank and chair of G20’s Financial Stability Board, has stoked concerns over future loan costs by suggesting that the housing market is currently the biggest threat to the economic recovery.
Another organisation predicting a cooling down in both the property and mortgage markets is the Nationwide Building Society. The lender, which operates one of the country’s most respected house price indicators, has warned that the outlook is “highly uncertain”.
Robert Gardner, the building society’s analyst for property values, said that mortgage changes and worries over the future of interest rates are undoubtedly having an effect on the public’s desire to move or take their first steps on the market, but he feels a shortage in new homes will help ensure that price falls will not be too severe.
House building grew by its largest number in more than a decade during July, but figures are still way short of what is needed.
A lack of suitable land is a key problem for developers, with restrictions in place preventing homes being constructed in green belt areas. Another issue building firms are facing is a lack of high quality materials and contractors.
Markit, whose monthly index tracks building levels, revealed that construction activity saw its steepest increase since November 2003 this summer, but the sector is still feeling the effects of the recession.
Tim Moore, Markit’s chief economist, explained that “cuts to supplier capacity” now mean that material deliveries are taking longer than ever.
According to Redrow founder Steve Morgan, the biggest challenges his business has faced in recent months have been a shortage of bricks, a lack of skilled workers and stringent planning laws.
Speaking to the Daily Mail, he said that many brick manufacturers were forced to close down during the difficult years towards the end of the last decade and the government has not done enough to kick start the industry since.
In 2009 figures suggested that the UK had a stockpile of more than 880 million bricks, but an increase in building in the past couple of years has reduced that number to a record low of 336 million.
Mr Morgan also accused politicians of ignoring the fact that developments need to begin in rural areas which are deemed to be of low quality.
Boosted by government backed schemes such as Help to Buy, some 122,590 homes were built during 2013 and the Labour Party has promised to take that number to more than 200,000 if it wins next year’s General Election.
Written by: The Team | On: August 22, 2014