British housing market sees further decline
British home sellers have slashed their asking prices by more than £4,000 (€5,000) during the past month as the number of properties on the market hits a new high, figures showed today.
Average asking prices in England and Wales dropped by 1.8% during the four weeks to July 12, following a slide of 1.2% during the previous month, according to property website Rightmove.
The group said the fall, which was the biggest ever recorded for July, left the average asking price of a home at £235,219 (€295,292) - 2% less than a year ago.
It said sellers were finally realising that they had to undercut other properties on the market from the beginning, as the number of homes for sale continued to soar.
The number of unsold properties UK estate agents have on their books rose for the sixth month in a row during the period, to reach an average of 77 homes per estate agent.
The increase bucked the usual seasonal trend, which typically sees the number of properties up for sale fall as the market gathers momentum during the busy summer selling season.
The group said the rise was not being driven by an increase in the number of homes being put up for sale, with new instructions around 20% lower than during the same period of 2007, but rather by a stagnating market as properties failed to sell.
Miles Shipside, commercial director of Rightmove, said the current drop in transaction levels was the most alarming characteristic of the current market, and would have the most widespread impact.
He added that any meaningful increase in sales volumes would require a u-turn among lenders over their current lending policies.
He warned that until this happened, house prices were in danger of falling further than the level that was required to address the underlying affordability constraints.
Mr Shipside said: "The doom and gloom attitude should be about the drastically low level of sales which affects the wider economy, not just about falling prices.
"How long the chronically low volumes continue will be greatly shaped by the attitude of the lenders.
"Following lenders' irresponsible lending in the late 1980s, there was a similar overreaction to risk that is repeating itself now. So banks need to be careful they do not get blamed for a second crash in 20 years."
The housing market downturn is being exacerbated by the problems in the mortgage market.
Lenders are tightening their lending criteria and increasing their rates in response to the credit crunch, making already stretched housing affordability worse.
Halifax recently said house prices fell by 2% during June, bringing falls so far this year to 8.9%, while Nationwide said they dropped for the eighth month in a row during month, falling by 0.9%.
A spokesman for Communities and Local Government said: "We welcome the fact that some lenders are cutting mortgage rates and hope that others will follow suit as soon as possible.
"We are taking action to both deal with the current difficulties in the market in the short-term, whilst maintaining our focus on the long-term need for more homes.
"The issues affecting the mortgage and housing markets are global, and are a very different situation to the early 90s when high interest rates and unemployment affected the market.
"The long-term demand for housing remains high and the fundamentals of the economy are sound with low unemployment and historically low interest rates."
