Property website Rightmove said UK house prices tumbled again last month – but the good news (for some) is that we could see the market start to pick up again towards the end of 2009. Although prices dropped again last month, according to its latest index, Rightmove says there are fewer houses coming onto the market, which should lead to a faster alignment between supply and demand. Now houses have become more affordable, and with the Government actively encouraging more mortgage lending, more buyers are likely to crawl out of the woodwork – which could mean that prices start creeping up again before the year is out.
Of course the picture is still pretty gloomy for homeowners, particularly those that bought their properties at the top of the market. According to Rightmove, last month’s 1.9% drop (to an average of £213,570) means prices are now 7.3% down in the last year. And bear in mind that this is just asking prices – sale prices will be considerably lower, with the likes of Halifax pointing to a 16.2% drop in the last year. What’s more, they’re all expecting further drops this year: economists are predicting that house prices still have another 10-12% to fall.
However, there was some cause for optimism from Rightmove today. Unlike the previous recession of the 1990s, the supply of homes for sale is actually shrinking - the number of new listings in January was less than half last year’s figure, as homeowners decide to sit tight and ride out the slump, while housebuilders are also bringing fewer properties to market. ‘The reduction in the number of properties coming to market appears to be aligning supply and demand more quickly than in previous downturns,’ said Rightmove’s Miles Shipside. Meanwhile new buyer enquiries are on the rise, as would-be buyers start sniffing out bargains (although it does mean that lots of people are choosing to rent instead of sell, leading to over-supply in the lettings market and possibly forced sales in the future).
The other glass-half-full angle is that affordability has improved drastically in the last year. In fact, Lombard Street Research reckons that house prices are now (relatively speaking) at or even below their 50-year average; in other words, for the first time in years, buyers can get their hands on a house for more or less its fair value. Although that’s assuming you can find any way to finance the deal. ‘If you can get access to a mortgage, have managed to keep hold of your job and have a decent deposit for your mortgage, the affordability situation has improved greatly in the past year,’ LSR’s Jamie Dannhauser told the Telegraph today. That’s three pretty big ‘if’s, there...