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Friday, December 13, 2013

Asking prices from new U.K. home sellers fall slightly in November

The Help To Buy Scheme has numerous restrictions that limit borrowing
Annual U.K. home prices have risen 4%
By Rob Steen 

Asking prices from new sellers have fallen slightly in November according to an index from Rightmove. The price falls are in line with the normal pre-Christmas trend, but the rate of the decrease is slightly lower than previous years. 

The latest figures have put fears of a housing asset bubble on hold as the average November fall for the last three years has been 3% whereas the average fall in November 2013 alone was 2.4%. The average price of a home is now £246,237, a decrease of £6,181. Annually, house prices have gone up by 4% which is the highest rise since November 2007. 

Rightmove director and housing analyst Miles Shipside states that fears of a housing bubble due to government schemes might be premature. Stricter lending criteria has been introduced which will assess mortgage borrowers’ ability to repay the loan therefore a repeat of the housing bubble seen in the previous ten years appears to be unlikely. Due to the number of people showing interest in the Help to Buy scheme, financial authorities have expressed concerns that demand may outstrip supply. However, the stricter rules regarding who can borrow and who can realistically afford to repay a mortgage under the scheme may prevent many from gaining access to a loan. This may deter the aforementioned housing bubble.

The Help to Buy scheme has been hailed a success by the government but the Rightmove report states that one in four potential home movers are not aware of the second phase of the scheme being launched and some have never heard of the scheme. It therefore appears to be too early to tell what impact the second phase of the scheme will have in the long term. Rightmove director Miles Shipside states that more work may have to be done should the Help to Buy scheme really benefit those who need help to get on the property ladder.

Although little of the Help to Buy scheme mortgage applications have been approved so far, consumer confidence has been boosted surrounding the mortgage and housing market. Some estate agents have reported that very few applications have been approved and one lender has reported that only 169 mortgages out of 1,075 applications have been approved. This may indicate that talks of a housing bubble may be unrealistic as, there may be significant demand for housing and mortgages under the scheme, but not every applicant is gaining access to the mortgage they need for their home. Additionally, only two lenders have currently joined the scheme so far.

Despite this, traffic on the Rightmove website has risen by 30% since the scheme was introduced. This is compared with 2012 figures. Interest has been growing in the market showing that it is set to grow further during 2014. During the months leading to Christmas, more people are looking to sell than to buy, therefore the asking prices on the market will be driven down due to competition. This may be the best time of year for potential buyers to set foot on the market due to the lower asking prices. Furthermore, it is also the ideal time for homeowners to sell their house quick.

About the author: Rob Steen is a freelance copywriter who specialises in property and construction.
He sometimes writes for the Property Buyer website.

Image license:  I see modern Britain, CC BY 2.0