Price declines across the UK real estate market are raising doubts about the sustainability of a resurgence, and heighten fears of another correction. Increased supply is fueling buyer selectivity and forcing realistic vendor expectations, but prices remain considerably stronger than the March 2010 nadir. See the following article from Property Wire for more on this.
Britain face the risk of a double dip in its real estate market as prices are still too high, the International Monetary Fund is warning.
In its latest World Economic Outlook, the IMF describes the situation as ‘worrisome’ and says that unless more jobs are created the chances of a double dip are increased.
‘What remains worrisome is that house prices are still high based on traditional valuation yardsticks and policy support may not be enough to prevent further correction,’ the report said.
It comes as the latest property index shows that even prime London real estate is not immune. The average price of prime central London residential properties fell 0.2% in September, the third monthly decline in a row during September, according to the latest figures from Knight Frank.
Prices have now fallen by 0.7% since June. Yesterday the latest Halifax figures show that average UK prices fell 3.6% in September.
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Both figures mark the end of the property market revival in the UK and the price falls have been predicted by analysts and commentators. Howard Archer, chief UK economist at the IHS Global Insight, described the as ‘an absolute shocker’ and added; ‘It will undoubtedly raise fears of a housing market crash.’
The Knight Frank report points out that despite the price fall in London, described as ‘modest’, prices are still nearly 15% higher than they were a year ago and 23% higher than the low reached in March 2010.
‘The central London residential market has experienced a strong revival over the past 18 months, with both prices and sales volumes rising steadily from the very weak market we saw in late 2008 and early 2009. The London market has certainly felt the benefit of the weak pound, which has drawn in more overseas buyers, and more importantly very low mortgage rates which have encouraged new purchaser activity,’ said Liam Bailey, head of residential research at Knight Frank.
‘There is no doubt that the market slowed over the summer period and as we move through the autumn market there is a more cautious approach from potential buyers. Which means that vendors are having to look very carefully at pricing,’ he explained.
‘Price falls over the past three months are not surprising, bearing in mind the strong growth we have seen since March 2009, however these falls do provide a warning to potential vendors regarding setting asking prices,’ he added.
Looking ahead, Knight Frank believes that the danger for vendors is in overly ambitious pricing. ‘Most agents feel that asking prices are currently 5% to 10% above realistic levels and until vendors move to address this issue the market will be slow in terms of the numbers of sales achieved,’ Bailey said.
The Knight Frank figures also show that the number of new buyers coming into the market slipped by 13% on a year on year basis in September, while the number of properties for sale rose by 13% over the same period.
‘Low supply has been a noticeable feature of the market for over a year, recently however there has been a welcome improvement. We have seen the addition of some very good quality properties for sale across most price brackets, which has helped to generate additional interest from buyers,’ Bailey explained.
‘Supply and demand trends have favored vendors over the past year, but through the summer the market has begun to shift slowly in favor of the buyer. Although competitive bidding remains a common feature of the market for the best properties,’ he added.
This article has been republished from Property Wire. You can also view this article at Property Wire, an international real estate news site.