House prices fall but transactions rise

This is according to the latest LSL/Acadametrics House Price Index which showed:

• Prices were down 0.8% in June on a monthly basis, as highest value transactions fell following the Stamp Duty rise in April
• Transactions were up 20% in June, much faster than the usual seasonal uptick, although activity overall remained quiet
• House prices lag behind consumer prices and incomes since 2006

The research shows that since January 2010 there have been moderate increases in housing prices but the fall of 0.8 in both June and March have basically eradicated the increases. The average house price at the end of June stood at £219,365, a level similar to the January 2010 average but still higher than the £200,234 seen at the low point of the recession in April 2009.

In recent years house prices have increased at a much slower rate than before 2006. In the five years leading up to 2006 housing prices rose 79%, but they have only increased by 11% between 2006 and 2011. In fact in the past five years house prices have increased at a slower rate than consumer prices which have increased by 17% since 2006 and salaries which have increased by 15%.

Richard Sexton, business development director of e.surv, commented: “In the current market, a monthly fall of 0.8% is relatively large. The greatest downward driver on national prices is the decrease in the price of high-value homes due to a slump in demand following April’s Stamp Duty rise for homes worth over £1 million.

“A flurry of activity in March saw transactions for £1 million plus properties rise 58% higher than the level of March 2010 and this created a temporary spike in prices in this sector of the market which has now evaporated.

“Nonetheless, putting the fall down solely to high-value homes would ignore the weakness in the present market. 8 out of 10 regions in England and Wales showed price falls in the three months to June and this indicates the impact of the continuing shortage of mortgage finance.“

David Brown, commercial director of LSL Property services, said: “The ongoing shortage of mortgage finance is taking its toll on house prices, and the requirement for substantial deposits is unquestionably the main stumbling block for the first-time buyer market.

“The good news is that there has been an increasing number of higher LTV deals trickling onto the market in recent weeks. But with doubts lingering over unemployment this year, and the anaemic growth in the economy, credit conditions remain tough and lenders are unlikely to abandon their cautious stance and completely open the taps for buyers without very large deposits.

“With the provision of social housing not up to scratch to meet the accommodation needs of Britain’s increasing population, the onus will remain on the private rental sector to soak up demand from the growing number of frustrated buyers.”