Although the UK economy is generally strong according to the Halifax House Price Index, house prices have now fallen, approved mortgage applications are in decline and new buyer interest has dropped.
The report indicates that, despite recording a 0.3 per cent rise for the three months to October compared with the May to July quarter, month-on-month house prices fell 0.5 per cent in October.
This development appears to be a positive one for people who have struggled to buy property following five interest rake hikes in the last 14 months. However, buying interest has fallen amid general turbulence in the financial markets, dropping for the tenth consecutive month in September according to the index. Mortgage approvals also fell 6 per cent in September as the credit squeeze started to take effect.
“The rise in interest rates since August last year and negative real earnings growth so far this year are curbing housing demand, leading to a slowdown in both price growth and activity,” comments Halifax chief economist, Martin Ellis.
Furthermore, house builder Redrow has added to concerns voiced by Bovis on October 7 that the credit crunch is to impact sales volumes as prospective buyers urge on the side of caution. The company predicts that sales will plunge from 2,216 in the first six months of the year to around 2,000 in the latter half.
In light of this, Mr Ellis says: “continuing supply shortages of both second-hand properties for sales and an ongoing failure of the rate of house building to match the pace of new household formation will also support house prices.”
However, this follows an announcement in the Queen’s speech on November 6 that 3 million new homes will be built by 2020, including more affordable property. Housing minister, Yvette Cooper says: “For many would-be first-time buyers, house prices have become a real problem. Over the last ten years low mortgage rates have helped over a million more people become homeowners, but as long as this country doesn't build enough homes, first-time buyers will be priced out of the market.”
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