House price drop good for buyers?

Ever the optimists, we like to think of the latest house price fall as an opportunity to pick up a bargain...

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Last Updated: 31 Aug 2010

According to two new surveys, house prices are continuing to slide. Property website Rightmove said average prices dropped by 0.8% in January, according to its monthly survey, following a 3.2% fall last month. Meanwhile the Halifax, the UK’s largest mortgage lender, said that prices fell all over the country last quarter – particularly in Greater London, which saw a 6.3% drop.

This follows the gloomy statement from the Royal Institution of Chartered Surveyors last week, predicting the biggest residential property market crash for 15 years. And the commercial property market also seems to be on the wane – last week’s profit warning from New Star Asset Management shows that property funds are starting to feel the pinch after months of falling values.

However, partial as we are to the glass-half-full approach, we prefer to see these figures in a different light. Asking prices are down by as much as 10% in some cases, and that’s starting to tempt buyers back to the market. If you’ve been hanging on to buy your dream home for the last couple of years, suddenly your money will go a little bit further – so people are out in search of bargains.

As Rightmove’s commercial director Miles Shipside puts it: ‘Enough sellers seem to have dropped their prices to encourage potential buyers, suggesting we might see a more active market at this lower price level.’ Which is exactly how the market’s supposed to work, isn’t it? Sure enough, more people are clicking on to Rightmove, and houses are spending less time on sale.

The government’s daft home information pack scheme hasn’t helped – it’s led to a glut of smaller homes coming onto the market to beat the deadline, bringing down the average price. But even at the best of times, it’s not easy to work out a consensus view from these surveys. Since they all calculate their average in different ways, and appear to come out with totally conflicting data about the same thing, we’re usually inclined to take them with a pinch of salt.

Clearly the property market has slowed down a bit from its breakneck speed of recent years – but that doesn’t mean that’ll we all be sharing a cardboard box in Docklands before the year is out. And those with nerves of steel might even be able to pick up a bargain...

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