Housing Struggles in Recession
A report by Hometrack found that house prices fell by 9% in the year to January, giving an average house price of £158,000. Given the huge decline in mortgage approvals, this decrease of only 9% seems relatively modest. Unsurprisingly the biggest decrease in house prices came in Central London where house prices fell 18%.
The length of time a house remains on the market has also increased upto 12.5 weeks.
Evidence on the ground suggests many houses are going for quite a bit below the asking price. Hometrack suggests houses are going for 90% of the asking value Therefore, some studies do not include all discounts.
The UK economy continues to shrink at the fastest rate since the early 1980s recession. There is concern we could face the biggest downturn since the Great Depression of the 1930s.
The housing market will continue to be depressed by:
- Rise in Unemployment increasing chance of home repossession.
- Low confidence in economy and housing
- Nobody wanting to buy while house prices are falling. Evidence suggests many potential buyers are extending their rental contracts to sit out the uncertainty and price falls.
- Lack of Mortgage availability. Although there has been a modest decrease in the Libor interbank lending rate, mortgage companies are still reluctant to offer new mortgages without large deposits.
On the positive side. many homeowners are seeing dramatic reductions in mortgage interest payments as the base rate is reduce to record levels of 1.5%.
