What will happen to house prices?

The stuttering housing market continues to struggle to make any real headway, according to the latest figures from house price analysts, but where does this leave buyers and sellers?

Not all the house price statistics released in the last week or so paint the same picture.

Britain’s biggest building society, Nationwide, reports a 0.2% fall for the month of April, leaving prices 1.3% lower than in April 2010 and putting the value of a typical UK home at £165,609.

But rival mortgage lender Halifax’s figures show a more dramatic 1.4% drop for the same month, putting the difference between house prices last month and in April 2010 at -3.7% and the average value at £160,395.

Meanwhile, property market specialist Hometrack did not see any price change at all in April. And its calculations indicate that this leaves the average house price at £153,100.

This all makes life very confusing for those struggling to sell their homes, as well as those contemplating buying a property. Here, we take a look at what the future holds for the country’s housing market, and what it means for buyers and sellers.

What’s really going on?

The only real certainty you can draw from the figures released by the various housing market analysts is that house prices are certainly not moving upwards.

Those in the know argue that three-month figures give us a better idea of the underlying market trends. But with Halifax claiming that house prices in the three months to April were 1.2% lower than in the previous three months and Nationwide saying that its statistics for the same timeframe show a modest rise of 0.6%, these indicators are also of little help.

It does seem, however, that the market is generally stagnating at the moment. Robert Gardner, Nationwide's chief economist, said: “It is not unusual to see a pattern of modest monthly increases and decreases when the market is fairly static, as has been the case since last summer.”


What does this mean for buyers?

Spring is traditionally a busier time of year for the property market.

Potential buyers generally start looking in earnest at this time, so it is often a popular period for homeowners to put their properties up for sale. But the last thing buyers want is to make a purchase only to watch prices plummet in the following months. It is therefore a good idea to drive as hard a bargain as you can – especially with more properties becoming available all the time.

The latest Housing Market Survey from the Royal Institute of Chartered Surveyors (Rics) indicated that the number of homes coming on to the market last month jumped significantly, giving buyers greater choice and more bargaining power.

And even though there is still a reasonable chance that the value of any property bought now will fall slightly over the rest of the year, one thing you can at least be sure of is that you are not buying at the top of the market.

According to Halifax, the current average house price of £160,395 is 4% above its April 2009 low, but remains a massive 20% below its August 2007 peak. Martin Ellis, housing economist at Halifax, said: "The underlying trend continues to be modest decline.

“However, there are signs that house sales are stabilising albeit at a level lower than the historical average."

What about sellers?

According to Rics, the number of actual sales going through has risen slightly, with average sales per surveyor over the past three months climbing to 15.2, the best level since December.

More than one in 10 more surveyors also predict that sales will increase rather than decrease over the next three months. And Hometrack claims that demand is up 22% since the start of the year.

Other encouraging signs include that the average time a property sits on the market has fallen to 9.6 weeks and that the number of people in full-time employment increased by 140,000 in the three months to February.

However, Hometrack also admits that property sales and values in the capital are powering the seeming recovery, with a 0.3% increase in London offsetting falls in many areas of the country. What’s more, it expects to see demand from buyers fall back again throughout the rest of the year.

Putting your property on the market at the right price is likely to prove crucial to a successful sale as a result. Before naming a figure it is therefore worth researching what else is available in your area and getting the house or flat valued by three local estate agents.

You may also have to be prepared to be a bit flexible if you do not receive any offers at that level. New figures show that the asking prices on more than a third of all properties on the market at the moment have been reduced at least once, with the average cut standing at 7.1%, or £19,000. Don’t despair if you do have to drop your original asking price a bit to drum up some interest though – the same market forces that mean you get less for your current property should also work to your advantage when buying a new home.

What is happening in the mortgage market?

The Rics survey indicates that a lack of mortgage finance is still keeping the number of people looking to buy down. Rics Michael Newey said: “There is still a long way to go before lending levels increase enough to have any real impact.”

However, mortgage payments have become more affordable thanks to the low interest rate environment. The deals available to borrowers with smaller deposits are also becoming a bit more competitive.

The best two-year fixed-rate deal available at the moment is from Santander at 2.79% with a £1,995 fee, while First Direct is offering a two-year tracker at 1.99% with a fee of £999.  You need a 40% deposit to qualify for the Santander deal and at least 35% for First Direct’s.

However, Norwich & Peterborough BS is offering borrowers with a 15% deposit a two-year discount, currently at just 2.59%, with a £995 fee.

Please note: Any rates or deals mentioned in this article were available at the time of writing.

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