House prices slump again - but for how long?

Another fall in house prices last month - but one expert says this decline will only be temporary...

by
Last Updated: 31 Aug 2010

The latest figures from the Land Registry show that house prices in England and Wales fell for the tenth consecutive month in June – the 1% drop (to an average of £180,781) means that prices are now just 0.1% higher than this time last year. Housing data company Hometrack paints an even gloomier picture: it reckons the average price fell 1.2% to £168,500, meaning prices are now 4.4% lower than they were 12 months ago.

According to the Land Registry, prices in London were the hardest hit last month, falling by 2.5% - a bit of a surprise, given that so far it’s been one of the more resilient regions. Hometrack’s figures showed a smaller drop in Greater London last month (of 1.3%), but it reckons prices are now 5.1% down on last year – more than the national average. Completed sales are also down across the board – the Registry recorded a 39% drop in April, with only the North-East seeing any kind of improvement (strangely, that was up 4.1% - perhaps people wanted to get into their new places before the end of the football season?).

However, at least one important voice reckons the decline will be temporary – and is predicting a 25% hike in current prices by 2013. The National Housing Federation has produced a report (based on research by Oxford Economics) suggesting that prices will fall next year, start to recover slightly in 2010, and then take off in the subsequent years, reaching an average of £274,000 by 2013. So much for the housing crash…

The NHF’s theory is based on the good old ‘supply and demand’ principle. It says that homes are not being built quickly enough to meet our needs. ‘People are living longer, they’re delaying getting married and they’re more likely to get divorced – meaning we now have more households than ever,’ says CEO David Orr. The federation reckons that over 220,000 new households are being created every year, and we’re only building 75% of the homes needed to house them. 

More to the point, as far as the NAF is concerned, is that because of the credit crunch, homes are not getting any more affordable – particularly in London, where the typical home cost 14 times local salaries last year. It’s calling on the government to keep investing in social housing, so people aren’t let by the wayside. No doubt it will be hoping that Sir James Crosby’s report on the mortgage market, due out tomorrow, contains a few crumbs of comfort...


In today's bulletin:
Ryanair in the red as Italians see red
KKR at the gate of NYSE
House prices slump again - but for how long?
From Russia without love
Young business stars top of the heap in New York

Find this article useful?

Get more great articles like this in your inbox every lunchtime

Subscribe

Get your essential reading delivered. Subscribe to Management Today