Stagnation Goes On….
Welcome to 2012 then and it looks like the stagnating value of residential properties will continue for most of 2012. Predicting house prices much further ahead is a largely pointless activity, especially given the current economic woes in mainland Europe.
According to the Nationwide Building Society, the average house price is now just under £164,000, that’s a level which we haven’t seen since since early 2004, apart from a brief dip at the beginning of 2009. House prices have actually risen in London, for reasons which we’ve explained before, which means that in the rest of the country the values will have dipped slightly.
The Halifax Building Society has also said that their figures show a fall of 1.3% in the value of residential property. Their figures reveal an average house price of just over £160,000.
Broken down region by region, the U.K. land registry also shows a disparity between house prices changes as follows:
Essentially the further North and away from London one travels, the bigger the falls in value. If you’re house is in commuting distance the fall is minor – up in the north-east and north-west it’s around 5%.
Commentators suggest that the U.K. housing market is proving itself to be resilient but the reality is that no one is buying and no one is selling; this is artificially propping up the values and it won’t be until credit in the mortgage market frees up and prospective buyers are able to qualify for reasonably priced mortgages that we’ll really see any realistic moves in property prices.
Less Credit Available In 2012
Added to the stagnation in the value of house prices is the unwelcome news that mortgages may become even harder to obtain. If you didn’t think that was possible you’d better think again; lenders who responded to a Bank of England survey say that the possibility of worsening economic conditions in Europe, added to a flat U.K. economy and tighter household finances mean their ability to lend will be hampered. Banks with major credit liabilities in struggling countries such as Portugal, Greece and Italy will be the ones introducing more strict criteria into their products.
Interestingly, in mid-December, the Financial Services Authority (FSA) will introduce new ‘common sense’ standards in 2013 which will govern the way mortgage companies lend to consumers. It hardly seems relevant now but there was a time when applicants were able to ‘self-certify’ their own applications, meaning one could essentially make up a salary to get a mortgage approved. It was also possible to obtain a mortgage for seven times an applicants salary in some cases and perhaps the most famous piece of irresponsibility was Northern Rock’s ‘Together’ mortgage which lent applicants 125% of the property value.
A huge economic crash brought all that to end of course and it’s difficult to predict a time when banks and other lenders will start lending at ‘normal’ terms again. It’s certainly a case of bolting the stable door after the horse has escaped but, as the chairman of the FSA, Lord Turner, explains: “….it is important to ensure that better practice endures in future when memories of the crisis recede and the dangers of poor practice return.”
