Experts rule out property recovery
Hopes of a recovery in the housing market have been dealt a double blow, with the news that house prices fell again in April and mortgage lending among Britain's biggest banks fell for the first time in four months during March.
The latest survey from property data firm Hometrack shows that the average price of a home in the UK has fallen by 10.3% in the 12 months since April 2008 - leaving the average house costing £155,600.
With spring a traditionally busy time in the housing market, it is little surprise that the month of April saw the rate of house price falls slow slightly. But Hometrack says this should not be taken as a sign that a recovery is in progress.
Richard Donnell, director of research at Hometrack, warns: "This suggests to us that the recent pick-up in demand is largely seasonal and unlikely to be sustained over the rest of the year."
While housing market activity remains weak, it does appear to have passed its worst point, says Howard Archer, chief UK and European economist at Global Insight.
For example, recent figures from HM Revenue & Customs show there were 60,000 sales of property worth more than £40,000 in the month of March, up 40% from 43,000 in February. Other surveys suggest a rise in buyer interest in property.
But despite such data suggesting the green shoots of recovery in the housing market, Archer warns: "We believe that house prices will fall significantly further, although we do expect the rate of decline to moderate gradually over the coming months. There is also likely to be increasing volatility in house prices."
Hot on the heels of the Hometrack survey were figures from the British Bankers' Association (BBA) which showed the number of mortgages approved for house purchases in March fell 6.8% from February to 26,097 - signalling a year-on-year drop of 25%.
These numbers appear to dampen any hope given by some recent reports that there is a recovery afoot in the market; the Council of Mortgage Lenders' recently revealed banks and building societies issued mortgages worth £11.5 billion in March, up 16% from February.
In addition, mortgage brokers report that several lenders have recently launched competitive new deals. Andrew Montlake, director of independent mortgage broker Coreco, says these new mortgage products have prompted a rise in borrower enquiries.
But he adds: "Lenders generally are still being very cautious and this caution is reflected in the latest BBA mortgage lending figures."
So, while rates on new mortgage deals look competitive, they remain reserved for borrowers with large deposits and clean credit histories. Even those that are able to borrow might be put off by the general dismal economic climate and threat of redundancy.
Seema Shah, property economist at Capital Economics, says: "There are simply too many downward pressures on the housing market to expect it to make a steady and significant recovery yet."
The BBA and Hometrack numbers come on the back of a Budget that offered very little in terms of help for homeowners, and left commentators unimpressed.
The main measure announced was the extension of the stamp duty holiday until the end of 2009, but many - including Peter Rollings, managing director of estate agent Marsh & Parsons - feel more could have been done.
“A stamp duty holiday until the end of 2009 isn’t going to boost the market - the dwindling number of mortgage approvals over the past year is proof that it didn’t make a difference in September when it was first introduced," Rollings says.
A hugely unpopular tax paid on property and share purchases. Stamp duty on property is levied at 1% for purchases over £125,000 (£250,000 for first-time buyers) which then moves up at a tiered rate. For property between £125k and £250k you pay 1%, then 3% from £250k up to £500k and then 4% from £500k to £1m and then 5% for properties over £1m. But unlike income tax, which is “tiered” and different rates kick in at different levels, stamp duty is a “slab” tax where you pay the rate on the whole purchase price of the property. On shares, stamp duty is charged at a flat rate of 0.5% on all share purchases. Figures correct as of May 2011.
Everything you own: all your assets (property, cars, investments, savings, insurance payouts, artwork, furniture etc) minus any liabilities (debts, current bills, payments still owed on assets like cars and houses, credit card balances and other outstanding loans). When you’re alive this is called your wealth; when you’re dead, it becomes your estate.