Transactions down 5.9% year on year as cheap mortgage deals fail to stimulate demand. Amongst regions, London alone has seen consistent price growth in the last 4 years.
David Brown, commercial director of LSL Property Services, comments:
“The fact that prices have only fallen by 0.1% means the steep declines seen between April and June have ceased. Transactions met their expected seasonal rise of 5% in July. This indicates that the market is not falling off a cliff in the short-term, but that it remains weak in the longer term.
"The number of properties sold in Q2 2011 was 5.9% down on the same period of 2010. This is primarily a result of the continuing restriction on demand from tight mortgage lending criteria. Lenders worried about the economic picture in the UK and beyond are reluctant to return to high-volume lending at high LTVs.
“But this hasn’t stopped lenders taking advantage of low interest rates to compete for market share of borrowers who are considered a safe bet. Below 70% LTV, there are now five year fixed rate deals below 3.4% and for many buyers stagnant prices and increasingly affordable mortgages make for great opportunities to lock into deals at an unprecedentedly low cost.
"Those able to convince lenders they are a low-risk borrower are taking their chance to get onto the market at a favourable time and this has driven transactions for larger properties. The 22% growth in mortgage lending for house purchase announced this week by the CML is testament to this.
"Of all types of property, flats have shown the weakest growth in transactions. This indicates that the first-time buyers who would normally be driving the market for smaller properties remain excluded from the market.
“Since 2007, only Greater London has seen a rise in property prices, but even this 5.6% rise over the last four years means prices in the capital have fallen 7.5% in real terms. Nationally, prices have fallen in real terms by just over 17%.
"This has significantly reduced homeowners’ ability to fund additional spending through equity release, but means cash buyers and low LTV borrowers will find property great value.”
Dr Peter Williams, housing market specialist and Chairman of Acadametrics, comments:
“The average price of a home in England & Wales at the end of July was £217,300, a level last seen in December 2009. The market is moving backwards, taking with it the modest gains seen in 2010 and in the early months of 2011.
"That said, the July 2011 price is still significantly higher than the £200,234 to which the average fell in April 2009, at the low point in the last recession.
“The LSL/Acadametrics Index slipped to 221.2 in July, from 221.4 in June, with a -0.1% monthly fall in prices.
"This fall was much less than had occurred in the previous three months. Likewise, with a fall in July to -2.6%, compared with the June fall of -2.3%, the rate of decline on an annual basis is slowing.
“On an annual basis, prices in the majority of unitary authorities in England and Wales (85 of the 108) are falling; the exceptions to this rule continue to be the inner boroughs of London and the more affluent areas elsewhere. The annual change in prices across the regions averaging -2.6%, with all the regions, except the North and North-West, experiencing further declines this month.
“Over the period 1997 – 2008, house price movements have been largely positive, with the purchase of a property being close to a ‘one-way’ bet in terms of an investment opportunity.
"Buyers were keen to get onto the property ladder since even a month of delay could mean having to pay a yet higher price. In the summer of 2007, the market peaked and prices started to fall. From then on, the notion that houses were a safe investment began to fade.
“Over the past 15 years, the number of properties sold in England & Wales in July has averaged 102,800. Monthly sales now range around 60,000 - some 40% less. Not since the summer of 2007 do we find a July in which more than 100,000 properties were sold.
“All indices have trended down since August 2010 and are now in or close to negative territory. Even though Nationwide and Halifax both reported marginal increases for July (0.2% and 0.3% respectively) there is little to suggest the market will change greatly in the next few months.
"Clearly, recent events continue to erode both confidence and the prospects for growth in house prices or indeed for the wider economy.
"Having said that, the costs of mortgages have recently fallen and loans have become more readily available with a strong suggestion that the core problem at present in the housing market is a lack of demand - itself a reflection of the difficult circumstances many would-be buyers find themselves in with respect to jobs and incomes.
“Although the housing market in England & Wales is depressed, it is very clear that in some areas and for some properties there is an active market with rising prices. Market segmentation is strengthening with some markets being underpinned by high numbers of cash buyers.
"Although there has been a shift from owning to renting, it is clear that there is still an underlying appetite to own a house and the question in part is how to translate that hidden demand into activity.
"More innovative mortgage products will help but a stronger outlook for the UK economy is the essential key. Little wonder that Whitehall is very focussed on its review of growth prospects and of ways to stimulate activity.
“As we write, the loss by the USA of its triple A status and, even more so, the political and
