In December, the decline in new home annual price growth decreased for the first time since March, although prices were down significantly for the year as a whole at -11.6%.
Commenting on the data, David Bexon, Managing Director of SmartNewHomes.com said:“New home prices levelled off in December, with only a nominal fall recorded from the previous month. The rate of annual price growth recovered slightly from November, but the overall decline in new home prices recorded in 2008 remains significantly high, surpassing -10% for only the second time on our records.
“However, the decline in new home prices over the past year as a whole was less substantial than the downturn recorded in the re-sale market, with certain parts of the country reporting only very marginal falls in developer asking prices.”
Steep decline in asking prices comes to a halt in December
“Having dropped expectations significantly in previous months in a bid to boost end of year sales, developers put a halt on price cuts in December. With demand price (the price new homebuyers are willing to pay) having wavered very little over the past few months, hacking asking prices further before the typically slow Christmas period would have had a negligible effect.”
New home appeal will sustain their premium
“While new home and re-sale prices showed a parallel decline in the second half of 2008, new homes continue to be marketed at a higher value than re-sale property. Developers are in a unique position to offer an appealing package to home buyers in the current market. Not only will they do everything possible to facilitate the moving process, including significant financial assistance and part-exchange, but new homes also offer greater peace of mind for owners. As well as major savings on home improvements when buying new instead of re-sale (up to £22,000 according to the New Homes Marketing Board), ten year warranties and greater energy efficiency are facets that should not be underestimated in these uncertain times.
“Although I expect new home prices to continue falling alongside re-sale into mid 2009, I do not believe the decline will be as sharp as some are predicting. The restricted output resulting from developers mothballing schemes will impact significantly on the supply of new homes, cushioning prices and possibly leading to some recovery in late 2009, as the current pent-up demand reaches its highest point.
“Signs are also positive for renewed competition in the mortgage market this year. HSBC has already introduced its lowest ever mortgage rate, and the Government’s new £100bn mortgage guarantee scheme should help to stimulate the banks’ overall willingness to lend.”
