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Official confirmation of a slowdown
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Government
figures have confirmed a widely reported slowdown of the
UK's housing market.
The UK housing market has
settled into a slump as house prices fell for the 10th month
in a row, dropping 1.2% by the end of July 2008, according to
property market watcher Hometrack.
Hometrack figures show July’s
price drop has wiped £2,000 from the value of the average UK
house which now stands at £168,500. Over the last year
about 4% has been knocked off house prices which is equal
to about £7,800 from this time last year when the
average house price was £176,300.
Hometrack said every test of
activity in the UK market showed that the slowdown was now
gathering pace.
‘Indicators of market
activity across the housing market remain weak with the
survey highlighting a 20% drop in demand over the last
three months,’ said Richard Donnell, director of research at
Hometrack. ‘Transaction volumes have been the greatest
casualty of the decline in demand over the last 12 months, the
vast majority of homeowners simply do not need to move at the
moment.’
The time it takes to sell a
property jumped by almost a week to an average of 11 weeks,
rising from 10.3 weeks in June. Homeowners pushing for a quick
sale have had to accept just 90.9% of their asking price
falling from 91.6% last month.
Donnell said ">recent
price falls have been concentrated in southern England.
Despite this the survey revealed prices fell across 64.9% of
the country compared with 58.9% in June.
‘The majority of recent price
falls have been concentrated more in southern England where
prices have declined off a relatively high base after the
strong growth through 2006 and the first half of 2007,’ said
Donnell.
The average price of a home in
‘middle Britain’ by Christmas 2008 will have dropped £40K
from its peak, a group of economists, psychologists and
finance industry experts has warned today.
Such a fall would equate to a
fall of more than 18% off middle Britain property prices,
according to AXA’s ‘Financial Taskforce’. This would
leave middle Britain – defined as households with an
income of between £40,000 and £100,000 a year – seriously
exposed to the risk of negative equity.
The taskforce calculates that a
‘typical middle Britain’ household that bought a home in
March of this year might now have only £15,000 worth of
equity left in their property – equivalent to just 9 per
cent its value.
The AXA taskforce was created earlier
this year with a view ‘to investigating the financial
problems facing Middle Britain and what steps can be taken to
solve them.’ It includes representatives from economics
consultancy Centre for Economic & Business Research (CEBR)
and financial psychology specialist Design Technology, as well
from its main sponsor, insurer AXA.
Steve Folkard, head of savings
and pensions policy at AXA and a member of the taskforce,
predicted a ‘very tough 18 months for middle Britain's
housing market’. ‘Middle Britain may have managed to
weather the storm before now, but that resilience is being
seriously tested by the ongoing effects of the credit
crunch,’ he said.
‘Negative equity is something
most of us will remember from the early 1990s and there's
nothing to suggest that Middle Britain will be caught up in a
crisis of that magnitude. However if you bought a home earlier
this year you should bear in mind that the equity you have in
that property could go down before it goes up.’
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