Property expert Rightmove has today released an update on the UK property market which apparently shows that property prices were pushed up by 3% in October despite the fact that the economic backdrop is difficult to say the least and the mortgage market is starting to slow down. So how can we explain a 3% increase in asking prices for properties in the UK during October?
Even though the UK government has yet to clarify the vast majority of proposed cost savings from the public sector budget there is no doubt that the fear of public sector spending cuts is impacting upon the UK economy. One area which has been impacted more than most over the last few weeks is the UK housing market with buyers now retreating to the sidelines and many sellers pushing forward to take advantage of current prices.
UK housing minister Grant Shapps has fallen into a similar trap to that set for Gordon Brown by declaring that the UK government is looking to avoid the traditional boom and bust scenario in the UK property market. Time and time again politicians seem to ignore the fact that boom and bust economic cycles have been occurring forever and a day and ultimately they are down to the sentiment of investors and consumers.
The prominent Royal Institute of Chartered Surveyors (RICS) house price index fell to -36 in the three months to September from -32 in the three months to August. This fall in the index reflects the fall in house prices in England and Wales and is the largest one-month fall since May 2009. While the drop is effectively blamed upon sellers rushing to the market to sell before further perceived weakness in the UK economy there is also no doubt that buyers are becoming more and more concerned with many retreating to the sidelines.
Reports that UK house prices on average fell by £6,000 in September 2010 were a bitter blow for the sector and have obviously injected some concern into the consumer market. However, is this the beginning of a sustained collapse in the UK housing market or nothing more than a temporary blip?
Today's revelation that the average property price in the UK fell by £6000 in September, compared to August, was a bitter blow for those hoping that the UK market would remain strong in the short to medium term. If we are seeing significant falls in the cost of property in the UK even before the vast majority of government austerity measures have kicked in, the situation in the short term does not look good. So is the UK property market on the verge of collapse?
The average price for a property in the UK now stands at £162,092 which represents a £6,000 fall between August and September. There is now growing concern that the UK property market has peaked in the short-term and against a backdrop of difficult economic statistics there is very little chance of a short-term recovery. However, the consequences of a £6,000 drop in the value of property in the UK could be very far reaching.
News that housebuilding in the UK has fallen for the first time in 12 months is a worrying sign for the industry and a worrying sign for the UK economy as a whole. A survey released today cast a very dark shadow over the sector with confirmation that orders fell in September for the fourth straight month, job losses are increasing and work rates on offer to subcontractors have been slashed of late. All in all it seems as though the miniboom in the UK housing sector only a few months ago is coming to an end.
The UK government has followed through with plans to incentivise councils to build new houses in the short to medium term with an array of bonuses and lucrative payments on offer. However, as ever, the devil is in the detail and today we find that in order to fund these significant payments for those who build houses and reach their targets the government will slash grants to local authorities who fall behind schedule. So where will this leave UK taxpayers?
Despite the fact that house prices remained fairly flat in September, showing a 0.1% rise according to the Nationwide House Price Index, the three-month rate of change has turned downwards for the first time since November 2009. House prices fell by 0.9% in the three months to the end of September compared to the three-month period ended August. This longer term trend would appear to show that house prices are starting to struggle due to a mixture of lack of demand, an excess of houses for sale and tighten liquidity in the mortgage markets.
