Fears are growing that Britain’s property bubble is about to burst.
A string of indicators last night triggered concerns that the market is running out of steam – and could be heading for a correction or even a crash.
Prices in London are falling at the fastest pace since the financial crisis – but the declines are not limited to the capital.
Houses are also losing value across the North East as well as in towns and cities such as Winchester, Oxford, Wycombe and Blackpool.
Pockets of Devon, Derbyshire, Lincolnshire, Hertfordshire, Berkshire, Staffordshire, Cumbria and Surrey are also affected.
Prices in London are falling at the fastest pace since the financial crisis – but the declines are not limited to the capital
The number of property sales has also tumbled, by as much as 65 per cent in some areas, as buyers worried about rising interest rates baulk at the ‘silly money’ demanded by sellers.
Houses prices have enjoyed almost a decade of strong growth since the financial crisis but experts fear this has left property overvalued.
Estate agents said prices are now being cut to tempt buyers back in, particularly those worried about rising interest rates as they struggle to raise enough money to secure a mortgage.
Reuben Young, director of Priced Out, which campaigns to make housing more affordable, said: ‘There can be no doubt that we are in a bubble – people buy housing not just for security, but in expectation that prices will rise in future. At some point the bubble will burst.’
But, in a warning to first time buyers hoping to take advantage of lower prices, he said the fall seen so far ‘does not mean it’s bursting now’.
A report by the Office for National Statistics and Land Registry yesterday showed:
- Overall UK house prices rose by only 3 per cent or £6,714 to £228,384 in the 12 months to June – the slowest increase since August 2013;
- London prices fell 0.7 per cent or by £3,400 to £476,752 – the sharpest decline since September 2009 when the UK was deep in recession in the wake of the financial crisis;
- Prices fell by 23.8 per cent or £220,000 in the City of London, 13.9 per cent or £187,000 in Kensington and Chelsea, and 12.1 per cent or £132,000 in Westminster;
- Prices were also down year-on-year in the North East, by 0.6 per cent or £825 to £127,271;
- There were also falls of 5.3 per cent in Purbeck in Dorset and 4.9 per cent in South Buckinghamshire while homeowners in Winchester, Wycombe, Stroud, Oxford and Blackpool saw declines of between 2 and 3 per cent.
Experts warned that prices have risen too far in parts of the country – resulting in a dramatic collapse in the number of sales as buyers are put off by sky high asking prices.
The number of property sales has also tumbled, by as much as 65 per cent in some areas, as buyers worried about rising interest rates baulk at the ‘silly money’ demanded by sellers
Many sellers faced with demands to cut their prices have refused to do so – instead withdrawing their houses from the market.
Across England, the number of transactions fell 19.3 per cent between April last year and April this year. Sales were down 13.9 per cent in Wales, a similar amount in Northern Ireland, and 9.4 per cent in Scotland.
But in parts of the UK the falls were even more dramatic, with sales down by 50 per cent or more in Copeland in Cumbria, Richmondshire in Yorkshire and Hertsmere in Hertfordshire. In Newham in London they were down 65.6 per cent.
A shortage of supply has helped prop up prices in some areas, as a large number of house-hunters chase a limited number of properties.
Experts warned that when sellers accept that the market has softened, and are willing to accept lower prices, a flurry of homes coming onto the market could push prices down further.
Howard Archer, chief economic advisor to the EY ITEM Club, said: ‘The downside for house prices is being limited by a shortage of houses for sale. If a significant amount of supply starts to come on the market you would expect that to take away some of the support for prices.’
Estate agents said prices are already being cut to tempt buyers back in, particularly those worried about rising interest rates as they struggle to raise enough money to secure a mortgage.
Jeremy Leaf, an estate agent in North London and a former residential chairman of the Royal Institution of Chartered Surveyors, said: ‘Price drops are continuing and reflect a new realism in the market. If you want to sell your property, it needs to stand out and price is the obvious way of doing it.’
Experts warned that prices have risen too far in parts of the country – resulting in a dramatic collapse in the number of sales as buyers are put off by sky high asking prices
Lee Pendleton, founder director of independent estate agents James Pendleton, said: ‘People have been asking for silly money. But the market has changed. Sellers need to be realistic about the market. If a house is not selling, it is usually down to price. In South West London, where we operate, house prices rose 180 per cent in ten years – it’s insane. Some areas are still over-inflated and some people are still asking for inflated prices. But these houses are not selling.’
He warned that prices would need to be cut further if interest rates rise again following hikes last November and again this month.
Separate figures from UK Finance revealed there has been a sharp fall in the number of landlords buying properties.
Some 5,400 buy-to-let mortgages were completed in June, down 19.4 per cent on the same month last year.
Estate agents said prices are now being cut to tempt buyers back in, particularly those worried about rising interest rates as they struggle to raise enough money to secure a mortgage
Both the government and Bank of England have launched clampdowns on landlords in recent years, through higher taxes and tougher lending rules.
‘The impact of these tax changes is really starting to bite,’ said John Eastgate, sales director at One Savings Bank.
Paul Smith, chief executive of Haart estate agents, said: ‘Areas of the market are suffering. Government policy on buy-to-let is clearly having a detrimental effect. Landlords are exiting the market in their thousands.
But he added: ‘The UK property market remains buoyant. Regardless of Brexit, demand is clearly still driving prices forward.
‘Unemployment is at its lowest level since 1975, and despite the recent interest rate hike, mortgages are still historically low and extremely accessible.
‘Westminster and market commentators alike need to step outside their London-centric bubble and look at the bigger picture.
‘Middle England is thriving – prices in areas of Birmingham, Nottingham and Leicester rose by a huge 10 per cent on the year, and families across the UK looking for a semi-detached home are having to pay almost £10,000 more than they were the same time last year. Hardly signs of a market that is slowing down.’