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General health of UK market overstated?

Thursday, February 04, 2010

Source: Catherine Deshayes

Residential property prices in the UK are slowing and the general health of the market is overstated, it is claimed...

According to the latest index from property intelligence group Hometrack prices increased 0.1% in January as the market began to show signs of slowing down. The average time a property took to sell also increased for the first time in a year, rising to 8.6 weeks, compared with 8.3 weeks in December.

The index also shows a fall in both the number of new buyers and the number of sellers coming to the market in England and Wales during the month, while there was also a drop in the level of sales agreed.

The figures contrast with ones reported by Nationwide last week, which showed house prices across the whole UK jumped by 1.2% in January.

But the Hometrack report raises a number of issues that are important for the real estate market. Prices are rising in just 7.6% of postcode areas that are concentrated in the south of England creating a bigger regional divide.

Greater London, the South East and the South West were the only regions to post a price increase during the month, with the cost of property remaining static in all other areas.

The group warned the property market was being driven by buyers who were mortgage free or only owed a small amount on their home loan, and because of the low volume of transactions this could distort the picture of the wider market.

‘There is a danger that the resulting skew in transactions, towards higher value property in better off areas, has led to the general health of the housing market being overstated, especially when set against the backdrop of the economy emerging out of recession. The market bounce back of 2009 was distinctly one dimensional and the outlook for 2010 is less certain,' said Richard Donnell, director of research at Hometrack.

But he added there had been a 1.3% drop in the number of new homes being put up for sale during January and this shortage of properties on the market had been a key factor in supporting prices during the past year.

‘While the latest figures show weaker demand, new buyer registrations and the supply of homes for sale are likely to post a seasonal upturn next month. The scale of this increase compared to previous years will be an important indicator of what sort of market conditions we can expect in the run up to the election,' explained Donnell.

Source: www.propertywire.com