Is the house price crash over

Date Published:
26/06/2010

So is it  good news or bad? And what’s going to happen over the summer?

blue-house-for-sale

Will House Prices Continue To Show Growth?

Although the property price reports year-on-year are showing signs of prices going back up again, the main reason they are showing growth is because they are comparing this year’s statistics against last year’s – when we had a poor first half of the year.

The second half of the year though showed a better performance, so what is likely to happen as we go through 2010 is that the property price reports won’t continue to show as much growth as they have so far. This is because the reports will be comparing ‘OK’ property prices of 2010 versus a better performing market in the second half of 2009.

What About A ‘Double Dip’?

The truth is that it is still possible property prices could slide backwards from their current recovery.

What Happened In The Last Property Price Recession?

Land Registry figures showed that property prices rose and fell on a frequent basis, both monthly and even annually following house price falls after the summer of 1989. For instance, in 1992, prices fell by an average of -1.79%; in 1993, they went up by 1.63%; in 1994, they went up by 3.94%; in 1995, they went up by 1.32%; in 1996, they went up by 7.59%.

This shows that there is a possibility that property prices could slip back again and as the above shows, it’s likely that the property price reports will not compare as well versus 2009, so this year, it is likely we won’t see much price growth by the time we end the year.

Will House Prices Drop By 50% Or Rise By 5%?

There are two schools of thoughts on house prices. Some economists and property price pundits believe that the average price of a property should equal three to four times the average income. At the moment these figures show average property prices are 6.5 times, with the average income being £25,500* and the average property price being £164,500**.

*Office Of National Statistics 2009
**Land Registry March 2010

And, in the main, this is why they believe property prices will fall again. Others believe that property prices will grow by around 5% or more, because they see a shortage in the supply of properties and demand increasing. This typically causes prices to grow, hence their predictions.

The truth is likely that both of these predictions are, and have been, correct. For example, there are some city centre flats that are oversupplied and struggling to secure sales because of a lack of finance. As a result, they have sold for 50% less than they were originally bought for.

There are other areas where properties are in short supply and the area is reasonably wealthy where prices do seem to have recovered and will probably rise by 5% or more in 2010. In these areas, homeowners can afford to trade up as they have 25% or more equity to put towards their next purchase. These buyers still have access to reasonably priced mortgages and for them, they see properties they couldn’t afford suddenly being affordable. As they intend to buy and typically stay in the property for the next 10 or more years, for them, buying a home even in these difficult times, is a safe bet as they are more concerned about securing a home for the family into the future than its value.

How To Work Out What’s Happening Locally

To really understand if the house price crash is over in your area, then you need to understand what’s happening:

* In the local area you are buying and/or selling in.
* To the supply and demand of the property you are looking to buy/sell.
* To property prices for the property you are buying, and selling, as the two markets may well be different.

Need more help for advice on buying in your area ? contact your local land registery office and look for the local trends.

This entry was posted on Saturday, June 26th, 2010 at 11:35 am and is filed under News. You can follow any responses to this entry through the RSS 2.0 feed or trackback from your own site. You can skip to the end and leave a response. Pinging is currently not allowed.

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