Quick House Sale Blog. Home Buyers Blog

Quick Move Blog

Friday, 9 October 2009

Where are UK House Prices Heading?

We've seen a few house price surveys this month that seem to indicate, at least on the surface, a housing market in the throes of recovery with price rises being recorded month on month. The latest Halifax survey showed the average house price having risen by £10,000 since April this year.

We've always argued that there is possibly further house price falls to come, particularly when you look at the underlying factors that have led to the recent rises, which is mainly a restriction in suppy. If higher prices and a more certain economy encourage more sellers, we could quickly see price levelling off as supply increases.

However, we're more concerned about the underlying economic factors such as rising unemployment that will create fear and uncertainty, negativily affecting the housing market. The recent fiscal stimulus could also lead to a rise in interest rates, which with the already tight supply of mortgages, could again constrict the market.

Fitch Ratings today has forecast that house prices in the UK still have 17% to fall from their peak in October 2007 with this further fall due entirely to te problems facing the UK economy.

Fitch had forecast that prices would fall 30% from their high and with prices down 13%, they are saying there is further to fall. Rising unemplyment, low wage inflation and poor credit will drag prices down. A fall of 30% would bring the house price-to-income ratio back to around or even below its long term average.

Fitch's report also warns that recent easing in credit is liekly to be temporary - as unemployment rises, so repossessions and arrears will rise, prompting banks to tighten their lending criteria.

High deposit requirements is meaning that there are fewer first time buyers, stifling the bottom end of the market, with most first-time buyers needing a deposit of £32,000.