Housing market is dysfunctional, says agent, as sales tumble

News Category: Industry News

The UK housing market has not functioned ‘normally’ for five years, a leading estate agency has said. Meanwhile, the LSL Acadametrics report, out this morning, said it expected only 60,600 sales to have been made in August, down 13.7% on July and a long way off the long-term sales average for August of 103,180.

CB Richard Ellis said current activity levels remain fundamentally weak with transactions and mortgage approvals at half the pre-recession levels.
 
The agent said that in any normal market measured over the long term, there are 1.2 million residential property sales per annum and house price growth of around 3%, with first-time buyers accounting for half of all mortgage lending.
 
The firm said that 2005 was the last year when anything like these criteria were met.
 
Jennet Siebrits, head of residential research at CB Richard Ellis, said: “While market conditions have improved dramatically, we do not expect a swift return to normality in the near future. The housing market is showing further signs of weakening and this volatility is likely to continue for a year, as the housing market and wider economy are hit by political and fiscal tightening.
 
“It would be undesirable to return to the imprudent levels of lending seen in 2006 and 2007, but credit availability will play a pivotal role in ensuring the housing market returns to normality.

“To reach over one million transactions, the mortgage market will need to relax its lending criteria, particularly for first-time buyers.”

The firm made its remarks amid the usual rash of conflicting housing market reports.

This morning, the LSL Acadametrics report said that average house prices grew 0.2% in August, but that sales activity was static throughout England and Wales, other than in London, where sales transactions picked up an astonishing 22%.

According to Acadametrics, the average price of a property in England and Wales is now £222,454 – astoundingly, that is around £50,000 higher than Halifax, Nationwide or the Land Registry's reports. 

According to Halifax this week, house prices also increased by 0.2% in August. This was the second successive monthly increase following a 0.7% rise in July, according to the lender.

The Halifax report contradicts Nationwide’s, which reported that house prices fell in August, and is out of kilter with Hometrack, which has reported falling prices in both July and August.

Halifax puts the current average house price at £167,953 and said that activity in the housing market was broadly stable in August.

Martin Ellis, Halifax housing economist, said: “The improved economy, strengthening labour market and low interest rates are all supporting housing demand. We expect that UK house prices will remain static overall in 2010.”

Meanwhile, the National Association of Estate Agents said this morning that the housing market slowed in August.

However, the NAEA said this was simply following the traditional cyclical pattern and that “longer-term trends remain broadly positive and the market is in a strong position”.

Agents made an average of seven sales in August, with only 21% of purchasers being first-time buyers.

The Government has ordered its statistics office to investigate house price indices to see why they say different things.


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