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Barrat house prices fall 19%

July 10th, 2009

Today one of the UK’s largest house builders announced that house “selling prices” fell by 19% in the last 12 months.  Barrat also said that the number of new build properties it completed fell by more than 5,000 to 13,202, that is a fall in new build homes of more than 27%.

Looking across the UK analysts indicated that the West Midlands has been most affected by the recession.  Barrat also indicated that the market for flats was poorer the houses and will switch some of its future building programme from flats to larger homes. 

Barrat like many house builders has suffered hugely in the recession with overall debts ballooning following its purchase of a rival for £2.2 billion in 2007 (not good timing with hindsight).  Going forward Barrat is reducing expenditure through less land purchases.  This is slightly worrying, the combination of less land purchased and building of larger homes suggests a significant reduction in the number of homes built by Barret in the coming years.  With the continued population growth forecasted, if other builders adopt a similar strategy, we could face a shortage of homes in years to come.

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Posted in UK House Prices

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BCC – Recession is not over yet

July 7th, 2009

The British Chamber of Commerce (BCC) reported that it is “far too early” to forecast the end of the recession in the UK.  In particular BCC noted that unemployment was expected to reach around 3.2 million  by mid 2010.  Perhaps more worryingly the BCC commented that without more measures to minimise effects of the  recession  the UK economy could “drop off” … I guess by this they mean enter into a depression (a prolonged and deep recession).

The BCC is a highly respected group, and its report is based on a survey of 5,000 businesses in the 3 months to June 2009, thus it is certainly a report that should not be ignored.

So what should the Government do to alleviate the concerns about the UK economy?  There is no magic bullet here, but key is building business and consumer confidence, financial liquidity, and perhaps reducing the burden on businesses to help with employment – such as cancelling the NI tax increase scheduled for 2011.

As reported in other posts on house4sale, such feedback from business experts suggests that we are far from the point of recovery in house prices.  Since starting this blog a month ago, and taking account of all of the reports studied, it would seem that we are at least 12 months away before we see any sustainable recovery in property prices.

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Posted in UK Economy, UK House Prices

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House prices rise again in June?

July 3rd, 2009

The Nationwide monthly update on house prices recorded a 0.9% rise in June, lower than their 1.2% figure for May, but it is still an increase for the third month in a row.

Should we (home owners)  get excited?  Well in short, not yet, but this is good news.  Some analysts are saying that the lack of properties for sale was creating the effect of increasing prices, the actual number of buyers is still well below normal levels for this time of the year.

From my perspective buying demand for houses is based on three factors:

1. Affordability – the property must be affordable, at the starter home end of the market it is a simple comparison largely based on the cost to rent versus the cost to buy.  If it is cheaper to buy than rent then there will be high demand from buyers.

2. Finance – there needs to be readily available mortgage finance so that buyers can buy.  Its not a question of whether you can afford the mortgage finance, currently it is often a case of whether you meet the lender’s criteria for a mortgage.

3. Confidence – as buyers we have to feel confident about house prices, it is a major purchase and we thus need to feel confident that prices are not going to drop off the cliff in a year or two from now.

So where are we on these 3 key factors?  Well, based on what I am reading from the many reports published:

Affordability – in many parts of the country it is still cheaper to rent than buy when you consider future expected mortgage rates (e.g. 5.5% to 6.5%) and the various ownership costs from insurance through to maintenance.

Finance – this is starting to improve, but we still have some way to go for first time buyers as the LTV (Loan to Valuation) often requires a very large deposit.  Credit ratings is still quite an issue for many would-be borrowers.

Confidence – this is starting to return with each positive report on house price increases, but for many there is still the uncertainty over increasing unemployment.

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Posted in Mortgages, UK House Prices

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The truth about house prices

June 29th, 2009

There have been so many different organisations publishing data on UK house prices I though it would be good to capture a snapshot of what everyone is saying and then see what can be collectively concluded from the various reports.  So here is a summary of headlines published in June 2009:

Housetrack – Reported that prices held steady in June, only 3% of postcodes saw prices fall.

Standard & Poor – Reported that house prices could continue falling into the forth quarter 2009.

Council of Mortgage Lenders (CML) – Reported a 2% fall in lending for May 2009, but commented that this is partly due to a fall in the number of remortgages.

Nationwide – reported a 1.2% rise in house prices for May 2009.

Halifax – reported a 2.6% rise in house prices for May 2009.

Rightmove – reported a 0.4% fall in house asking prices for May 2009.

Land Registry – reported a 0.2% fall in house prices for May 2009. The Land Registry also state on their website that they provide “the most accurate independent house price index available”.

So, what can we conclude form all of this?  Firstly there are widely conflicting reports on what is happening with house prices, there a several reasons for this.  One is timing, e.g. are price changes recorded on purchase completion (Land Registry) or at some earlier point in the purchase process from advertiser asking price through to mortgage offered.  Another factor is data volatility, as there are lower volumes of transactions then data from some sources may be more prone to error. 

But perhaps the most interesting point is that we have moved from a point 6 months ago when everyone was reporting falls to today where we have mixed reports.  This could well suggest we are getting close to the bottom of the market,  although before getting too excited, beware of a possible ”second dip” in prices as we have yet to see the full effect of unemployment which is not expected until 2010.

Overall conclusion – we are getting near to the bottom of the market, when all of the data sources say prices are steady or increasing, we will be on the way up again … until the next  change in the property cycle, but hopefully not for a few years!  So if you need to sell your house fast then may be the market will soon turn in your favour.

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Posted in UK Economy, UK House Prices

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Did house prices fall or rise in May?

June 26th, 2009

The NationWide reported an overall price rise of 1.2% in May 2009, BUT the Land Registry (which records all UK house sales) recorded a fall of 0.2% in average property prices.  So who is right?

On the face of it I would go with Land Registry, simply because they are based on a higher volume of transactions, that said, depending on how intelligently Nationwide puts its stats together, then they could be more accurate.  For example a bank/building society could make more like-for-like comparisons to see changes in similar property types, whereas Land Registry relies on transactions in a given postcode area.  But if you were a sceptic you might say that the bank want to talk up prices to get us buying and taking out their mortgages?

The most surprising thing for me from the Land Registry May 2009 house price data is how it varies by area.  For example Wales recorded an average increase of 1.2%, whereas London recorded a fall of 1.5% and Yorkshire & Humberside a 2.3% fall; worse still the North East recorded a 4.3% fall in May, lets hope that was just a statistical error!

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Posted in UK House Prices

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Where are we now with house prices?

June 25th, 2009

This is a tough one to answer.  Looking back the decline in UK residential property prices started around the end of 2007.  There has been much data published on prices falling month by month, although since March 2009 some have been suggesting price increases (Halifax reported an increase of 2.6% in May 2009), but for many of us it doesn’t feel like prices are increasing.

According to an article published in Telegraph.co.uk most towns and cities across the UK have fallen by over 20% from their peak in late 2007.   Some areas have seen dramatic falls in prices (figures based on February 2009)…

Blackpool: -28.2%

Kilmarnock: -26.5%

Hertford: -26.5%

Bridgend: -22.5%

Exmouth: -21.4%

Windsor: -21.1%

London: -21.4% (data from another source)

A useful source of data on house price changes in 12 months to April 2009 can be found on the UK Government Communities websites ..link http://www.communities.gov.uk/documents/statistics/pdf/1247222.pdf   The regional index highlights a fall of 15% in London and 14.8% in the South East.  But the largest falls by far have been in Northern Ireland where prices have fallen around 23% in the 12 months to April 2009.

Probably the key question for many is what about future house prices?  Well, there are many opinions on this, much will depend on the impact of unemployment, but from reading the many analyst reports our interpretation is we may have another 10% fall in average prices – but clearly this will vary by town / city.

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Posted in UK House Prices

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