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Once red-hot property market hits big freeze
Jonathan Prynn and Mira Bar-Hillel28 Apr 2008
London's once red-hot housing market is now frozen in a property ice age, with fearful buyers either reluctant or unable to commit themselves.
At a time of year when estate agents should be at their busiest, the number of houses and flats changing hands this spring is between 30 and 50 per cent down on last year, according to analysis by the Evening Standard.
It is a potential disaster for the thousands of estate agency branches around the capital and could keep the market in limbo for months or even years.
One major reason for the "buyers' strike" has been the withdrawal of 100 per cent mortgages for first-time purchasers and spiralling home loan rates. Mortgages have become harder to come by with approvals down 46 per cent.
Another factor is the torrent of bad news about the property market and the wider economy, which has sapped buyers of confidence and stoked their fears that there are further falls to come. For the first time in 15 years the shadow of negative equity has fallen across the capital.
Thousands of properties have been stuck on the market for months with only deep cuts in asking prices stimulating any interest. Andrew Gilbert, of the Ealing and Acton branch of agents Winkworth, said: "Last year, we registered about 60 applicants per week but now it's more like 20. There's no doubt that this market is a struggle."
He said the hardest hit would be those in the £350,000-£900,000 "mid-market" where buyers were mainly young families worrying about jobs and often school fees. Another west London agent said buyers wouldn't even look at properties that were not "realistically priced".
It was the same story in south London, where Anthony Bell, branch manager of Bushells in Streatham, said: "This time last year we'd be taking on 20 properties but could easily sell 30. Now if we take on 20 we can only sell 10."
Even in prime central London, where the international market plays a bigger role, sales are reduced. Foxtons director Andrew Weir said: "My guess is they're down 25 to 30 per cent. The drop-off is mainly in the speculative market, which has evaporated."
Savills predicted the number of houses sold this year will fall by 30 per cent and send prices crashing.
"This downturn is all about the credit crunch, or credit crisis as it has become," said Savills director Yolande Barnes. "The big question is whether the Bank of England's move will inject the necessary liquidity into the market to bring an end to mortgage rationing."
The mood of buyers will not be improved by the latest clutch of gloomy house price surveys and forecasts.
Today, property website Hometrack said the average London home has fallen in value for the first time since the start of the credit crunch, although only as yet by £100, to £309,100. Last week, City forecasters Capital Economics said values would fall by five per cent this year and six per cent next.
Savills said in a "worst case scenario" central London prices could drop 15 per cent this year and 10 per cent next year. It predicts prices in the wider London market will fall five per cent this year.
This week Nationwide is expected to reveal prices in April fell for the sixth consecutive month. The one silver lining is a mini-boom in the lettings market as would-be buyers rent instead. But for those brave enough to stick their heads over the parapet, this could be the time for a bargain.
Reader views (8)
Is this meant to be bad news? because I take it as the opposite. For far too long house prices have gone up due to increased debt burden, instead of 3 times salary mortgages, 10 times or higher was required. Just thank your lucky stars this bubble didn't pop, and is merely leaking! But this correction will be around for many many years.
- Steve, Manchester, UK, 29/04/2008 06:21
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“It is a potential disaster for the thousands of estate agency branches around the capital”.
I had my house under valued by £100,000 a year ago, by a devious agent who wanted a quick sale. I only found out once I'd exchanged. So if they're in for a tough time then good! The more that end up out of work, the better. They are all scum!
- Anon, London, 29/04/2008 04:41
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Why should we be against the planned bailout in the subprime mortgage mess -- the privatisation of profit and the socialisation of loss? Because of what it means: the actions of the UK government (mimicking the US, as ever)are acting in concert with the banking industry to maintain stratospheric house prices, to insulate them (with your money) against every falling to normalcy. An entire generation of people are being permanently priced out of home ownership -- kept paying the mortgages of others in privately-rented accommodation -- a new breed of have's and have not's.
If Conservatism or Liberal Democracy will put a stop to this then bring the Opposition parties on..
- Dave P, London, UK, 28/04/2008 23:52
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This is great news!
2% per week decline... the quicker the better!
- Mervyn King, City of London, 28/04/2008 20:07
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As the retail price index is currently 4.2%, that means in real terms, all boroughs have experienced a real fall in property prices.
- P. Wegener, London, 28/04/2008 17:53
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“It is a potential disaster for the thousands of estate agency branches around the capital”.
Don’t you think these estate agents are partly to blame for constantly pushing prices up, forcing buyers into a situation where they are overstretched and therefore having to pay more than they can afford?
I am pleased the tide has turned and buyers will no longer have to pay too much for a not very good flat.
- Anon, London, 28/04/2008 17:26
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According to my friends in the property business prices are falling around 2% per week Which is a lot more than is being revealed here.
- Cherry, London, 28/04/2008 17:21
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About time too, I'll wait for the thaw...
- Phillip Brian Lasham, Kent, 28/04/2008 16:34
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