And that’s a property website speaking…
© Copyright Nigel Mykura and licensed for reuse under Creative Commons Licence.
According to Home.co.uk asking prices for homes on the market in England and Wales have risen 0.5% since January ” despite poor market fundamentals”.
Those fundamentals include a surge in the number of homes on the market (up 12% year on year) and a dearth of buyers who can afford them.
It’s a no-brainer, says Home, that sellers will have to cut prices, and this draws a scathing rebuke from their analysts:
As we move through the first quarter of 2012 the UK housing market is experiencing a 12% increase in supply of property for sale when compared to 2011.
In a thriving economy where mortgage credit is abundant, GDP rising above inflation and job prospects looking good, such a rise in the numbers of properties entering the market would be a sign of good fortune.
However, in the current context of unemployment figures at a 17-year high (and rising), a contraction of lending by banks to individuals, shrinking economic output and over-burdened consumers increasingly resorting to ‘pay-day loans’ to make ends meet, the foundations of a healthy housing market are deteriorating.
Over-pricing in the current economic climate is simply folly. False optimism usually leads to disappointed sellers but, worse still, it could lead to a homebuyers’ strike and consequently rapidly falling home prices. We’ve already seen such a scenario play out in 2008. Properties piled up on the market and asking prices fell by 6%.
Only savage price-cutting and massive government involvement in the financial sector averted catastrophe and got the market moving again.
No one would wish to see a repeat of 2008 but, with both asking prices and supply rising despite dwindling demand, this could be a recipe for another disastrous year for UK property.
Savage price cutting in 2008? My memory must be going.
According to Home.co.uk? What measure are the using? How do they calculate price movement? What does it actually mean to include the whole of England and Wales. 0.5% decline is pretty meaningless.
By reducing the asking price homeowners can increase the chances of quick sale. When buyer cannot afford much and there are less buyers in the market asking price becomes one of the important factors in the property deal.