Economic fears keeping prices depressed in UK
Residential property prices in the UK have been falling back in April and May, with the two latest indices showing the market is sluggish.
Prices fell 1.1% in April and decreased by 0.3% over the year, according to the latest House Price Index from the Department for Communities and Local Government.
The average mix-adjusted UK house price was £204,439 and average house prices were 0.3% lower over the quarter to April, compared to a quarterly decrease of 0.4% over the quarter to the end of January.
Average prices remained unchanged during the year in England but decreased in Scotland, down 1.2%, were down 1.4% in Wales and fell the most in Northern Ireland where they are down 15.2%.
Prices paid by first time buyers were 1.6% lower on average than a year earlier and prices paid by former owner-occupiers increased by 0.2%.
The index also shows that prices for new properties were 4.2% higher on average than a year earlier whilst prices for pre-owned dwellings decreased by 0.6%.
It is fears over the economy and lack of mortgage finance that are depressing activity levels, according to the latest report from the Royal Institution of Chartered Surveyors.
Newly agreed sales in May slipped back from the previous month’s reading, as only 5% more surveyors reported sales rose rather than fell, the May 2011 UK Housing Market report shows.
The average number of completed sales per surveyor also fell by 3.4% in the three months to May, to just 14.7, the lowest level since January. Meanwhile, the average number of stocks per surveyor increased by 8.1% over the month to 71.3 as more properties came to market and many stayed on surveyors’ books for longer.
Given the rise in stock levels and fewer sales levels during May, the sales to stock ratio, an indicator of the balance between demand and supply, fell to 20.6%, well below the long run average of 33.5%.
Significantly, there was little sign of a renewed appetite to view property, with new buyer enquiries little changed on the month, down 2%. Many surveyors cited the bank holidays for the flattening of demand. Meanwhile, new vendor instructions continued to rise, but the pace of increase slowed slightly during May to 15%.
Turning to house prices, 28% more surveyors reported price falls rather than rises, the lowest reading since the beginning of the year. However, of those respondents seeing falling prices, the vast proportion, 82%, reported declines within the 0 to 2% margin.
A continuing theme over the past few months has been the distinct regional contrast between London and the rest of the UK. This continued during May, with London the only region of England where more surveyors saw rising rather than falling prices. Meanwhile, in Wales, Northern Ireland and Scotland, the price balance remains negative.
Looking ahead, surveyor’s expectations for future sales edged down, although they remain in positive territory at plus 9%. Price expectations, which are already negative, fell more sharply with 27% more respondents expecting prices to fall rather than rise over the next three months.
‘Buyer interest in purchasing property remains flat across much of the country and there is little sign of this changing any time soon. Uncertainty over the economic outlook remains as important as the availability of mortgage finance in depressing demand. On the other hand, the appetite to rent is continuing to grow. And, with little new supply coming onto the lettings market, the cost of renting is increasing and will continue to do so,’ said RICS housing spokesperson, Ian Perry.