UK house prices have not finished falling
The UK residential property market has seen some promising signs of recovery recently, with surveys showing house prices on the rise and a renewed confidence among buyers and estate agents. The house price increase in August was the fourth consecutive monthly gain, and, at 1.6%, the biggest rise since 2006.
[UKPRwire, Thu Sep 10 2009] The UK residential property market has seen some promising signs of recovery recently, with surveys showing house prices on the rise and a renewed confidence among buyers and estate agents. The house price increase in August was the fourth consecutive monthly gain, and, at 1.6%, the biggest rise since 2006.
Also, mortgage approvals have increased, reaching their highest levels in 15 months in July.
However analysts are predicting a second dip in the market later this year or early in 2010, with a further fall in house prices. The causes are several. First, interest rates which are still at a record low of 0.5% will have to rise at some point, throwing many homeowners into difficulties with their mortgage payments. The increase in repossessions that would follow would mean more low-priced properties back on the market and a consequent downward effect on prices.
In addition, banks anxious to restore their balance sheets are charging more for loans to the detriment of mortgage borrowers, thus narrowing the pool of potential housebuyers.
In the bigger picture, the economic outlook foresees a period of slow growth over the next decade, as the fiscal stimuli injected into the economy by the government will come to an end and taxes will have to increase to help reduce the budget deficit. These factors, as well as the rise in unemployment – which reached its highest level in 14 years during the second quarter of this year and continues to rise – will all have a detrimental effect on demand in the property market.
Commenting on this, Lawrence Smith of Decision Homebuyers said, “While the slight rise in house prices over the past few months has given a welcome boost to the market, it would be unrealistic to read too much into it. Tied as they are to the wider economy, house prices are likely to see further declines as demand lessens in the medium term outlook.”
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