According to figures released by Halifax, over the last three months house prices have fallen, and are ‘stagnating’.
The Halifax report said that in the past month, house prices have fallen by 0.1%. However, for the year up to April, their prices increased by 3.8%, which was the same figure in March. This means the average cost of a flat or house is now £219,649.
Property is Becoming Too Expensive
When asked about these latest findings Halifax’s housing economist, Martin Ellis, said that one of the reasons why property price increases are slowing down is because, for many people, house prices have become too expensive.
He said that, during 2014-16, there was a rapid increase in house prices, which means housing demand has now peaked because the affordability of houses has deteriorated.
This news comes as Nationwide revealed that house prices had hit their lowest rate in four years, with prices growing at an annual rate of just 2.6%. The Bank of England also revealed the number of mortgages that have been approved has fallen for two consecutive months.
Therefore, it’s highly likely that people will be turning to companies like Andrews & Partners Limited to have their question of, “How much is my house worth?” answered.
Speaking to the BBC about the figures Halifax has released, Samuel Tombs from Pantheon Macro-Economics said that this is further evidence that real wages are being squeezed, which is offsetting the jump in house prices from decreasing mortgage rates.
He also said that the shortage of supply will underpin house prices, especially when one takes into consideration the high moving costs many current homeowners face. Furthermore, lenders will continue to compete to reduce mortgage rates even further this year, which will increase the affordability and size of loans that some households can get.
Nevertheless, Tombs did add that due to the loan-to-income ratio rule that was introduced by the Bank of England in 2014, leverage would be unable to rise significantly further.
Under this rule, the number of riskier borrowers that building societies and banks are able to lend to must remain below 15%. These ‘riskier’ clients are those who need an amount that’s 4.5 times their annual income.
Risk Taking in Young Buyers
From the riskier borrowers to the riskier clients, delving into a 10-25-year stretch is conceivably the biggest commitment for a young, first time buyer. The upcoming snap general election in June, will be sure to churn the recent January debate Theresa May promised in regards to thousands of new home builds for first time buyers. Many young buyers are turning to the bank of Mum and Dad, hoping to get their foot on the ladder but there is a definite risk in property investment in such uncertain times. Perhaps the huge expenditure choices will refrain in the coming years, knowing that for young buyers looking to take advantage of new builds, that property might not be as good a value as initially projected, thus higher outlays towards the rental market.
In summary; many of those people making large spending decisions will be extra cautious over the coming months, as the ratio between earnings and house prices continues to affect what they can afford.