Christmas to cancel out housing market recovery
Recent house price gains are expected to unravel over the next three months as people focus on Christmas rather than the home-buying process.
The latest house price figures from online property portal Rightmove show that asking pries fell by 1.6% during November, following a 2.8% rise the previous month, bringing the average asking price to £226,440. November’s figure is predicted to be the first of three monthly falls, before asking prices resume their recovery in February.
“In all but the most buoyant of markets, home moving comes second to Christmas festivities,” says Miles Shipside, commercial director of Rightmove. “While the market has recovered from some dreadful lows, this month’s price fall proves that it does not yet have the strength to buck seasonal trends.”
Asking prices are now 1.6% higher than the same time last year. Rightmove says it is also seeing a similar number of properties coming onto market, although volumes remain around 30% below the number seen in 2007.
This shortage of stock has helped prices to recover, as demand for property has been outweighing supply. It was assumed that the stamp duty holiday on properties under £175,000 would help encourage sales, as this is due to end come January.
However, Rightmove says the fact that lenders continue to require large deposits from borrowers has made the incentive “almost irrelevant”.
Housebuilders, meanwhile, appear confident about the outlook for the property market. The UK’s largest, Persimmon, has reported it fully sold out for 2009, with £500 million of sales already in the bag for 2010 – up around 50% on the same period in 2008.
Prices have also held firm while cancellation rates have dropped to around 16%. This follows upbeat statements from Redrow and Taylor Wimpey last week, which both reported firmer prices, stronger reservations and lower cancellation rates as the sector starts to emerge from one of the most severe downturns in decades.
Persimmon said in a stockmarket statement: "While we remain concerned about the potential impact on our markets of any significant increase in unemployment over the coming months, debt is reducing well ahead of our previous guidance, sales volumes have stabilised and pricing conditions are currently more positive."
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.