Hometrack’s national housing market survey for October is reporting a 0.6 per cent fall in the average national house price and indicates that over the past eight months house price inflation has reduced steadily from its February peak of 0.9 per cent to negative growth since the summer.
There is now an excess of properties on the market, increasing in October, with buyers registered with estate agents falling by 3.8 per cent and properties listed rising by 5.6 per cent.
But Hometrack housing economist John Wriglesworth says: “This will mean a good time for brokers who are looking for better fixed-rate products, which we expect to start appearing soon.”
It is the fifth consecutive month that Hometrack has found an increase in the supply of properties and Wriglesworth says the excess supply points to further price falls in the coming months.
He is predicting that prices will not grow in 2005. “Rising interest rates have influenced the recent run of house price falls but the key reason for the stagnating house price environment is that prices have finally reached their peak in the current cycle but we see no sudden or significant prospective downturn,” he says.
Wriglesworth says much lower interest rates now compared with 10 years ago, strong rises in household incomes, lower unemployment and lenders willing to offer bigger mortgages relative to incomes all point to prices levelling out.
He says: “House prices will not plummet into an abyss as some of the doomist commentators have been predicting but they are likely to drop further over the next few months due to the current excess supply and the expected seasonal fall off in the number of prospective buyers. Prices should however begin rising again in spring next year when, barring further interest rate rises, buyers should return to support demand. Stagnation, not deflation, is the most likely future course of house prices over the next 18 months.”
Pink Home Loans associate director David Malle says this will mean a good set of new products coming in after the New Year: “The economics of Britain at the moment are conducive to a good mortgage market. We are expecting a number of new fixed products early next year.”
He says house price stagnation is good news for many mortgage brokers, who have been looking to try and find time to service their existing clients – some who have not be reassessed for a number of years. “Whenever house prices stabilise, it is a good time for brokers to start going through their books for remortgage business,” he says.
But it is not all good news for brokers. as there are obvious downsides to price stagnation. Across the country it seems that demand for houses is being adversely affected in a number of different ways.
For instance, Wriglesworth says in Avon, media scaremongering has seriously affected the markets, with some agents seeing sales drop off by up to 90 per cent in September due to market concerns. He adds: “Similarly, September was a terrible month for the north of London with sales and instructions down almost to nothing. Media scaremongering, interest rates and stamp duty worries scared off a great deal of buyers and sellers. Although viewings continued apace, no one was buying and very few wanted to instruct.”
However, both Wriglesworth and Malle agree there is still plenty of upside to the slowing house market.
Malle says: “The opportunities for business and better servicing of your clients are there. You just need to work a little differently when house prices stagnate. We have been expecting it for a while now so if it would be extraordinary if it has caught any intermediaries by surprise.”