Daniel Paul Residential logo
call-to-action call-to-action-mobile

House prices are on the slide – where will they go now?

Search for properties

To buy or to rent?

Property type

Minimum price

Maximum price

Minimum bedrooms

Sat 12 May 2018

House prices are on the slide – where will they go now?

We are slap bang in the middle of the spring househunting season, but this week’s news that the average price of a UK home dropped by more than £7,000 in April will have left many wondering: is this the start of a prolonged period of falling property values? If so, should would-be buyers hold fire on the basis that they could pay less in a few months’ time? Or do falling prices mean now is actually a good time to buy?

According to the Halifax, UK house prices fell by 3.1% last month, which means a typical property ended April being worth £220,900. The equivalent figure at the end of March was £228,100. The average price is now back to what it was a year ago: £220,400 in April 2017.

Meanwhile, recent Land Registry data confirms that parts of London and other areas have seen some big price falls this year. For example, the official average cost of a home in Islington in north London was £672,300 last August, but by January it had slipped back to £656,800, and then in February it tumbled by £30,000 to £626,700 – a fall of nearly 7% in just six months.

We asked a range of property market watchers what’s really going on, and whether it’s bad news – or actually good news for young people who have so far been unable to buy.

Ignore the Halifax index – there are more accurate measures of the market

“For most people who are selling and then buying another property, it’s a zero-sum game. If they take a hit on their property, they will pay less for the next one they buy. There is still a market – it’s driven by the “three Ds”: people are sadly still dying, running up debt and getting divorced, and these properties will continue to be sold. In many ways, lower prices may even be a bonus, as most of your moving costs are based on a percentage of your house’s value: stamp duty, estate agents’ fees and so on.

“For those thinking of buying for the first time, please remember that prices can fall as well as rise. Anyone buying today is likely to need to wait two or three years to recover the costs. Stamp duty, agents’ and legal fees and so on all add up.

“All house price indices are like average speed cameras – they give you an idea of an event that happened in the past. The deals that are being done today will be reflected in the house price indices published in October when, as a professional buyer, I am negotiating prices that I fully expect to be lower than those published today.”

• Dan Wilson Craw, director of campaign group Generation Rent

Buying is still out of reach for millions

“Rising house prices over the past 25 years have put home ownership out of reach for millions of people. But this trend has created a feedback loop that encourages investors to speculate on property. This diverts capital from productive parts of the economy, and lifts prices even further away from what the average household can afford.

“I hope this report from Halifax signals an end to house price inflation, and wages and savings will start catching up. Dispelling expectations that prices will keep rising will also help ensure that the landlords who are renting to the rest of us are doing it to provide long-term homes rather than gambling on capital gains and booting out tenants when they want to cash in.”

 

• Sam Mitchell, chief executive of online estate agent HouseSimple

No one really knows if this is a blip or the start of a prolonged period of falling prices

“Other than London, there is no evidence to suggest that local property markets have overheated. For buyers, they face a decision: whether to stick or proceed full steam with a purchase. There is no reason to wait based on this data. Waiting to see where prices might go next could mean missing out on that property you really want. Buying conditions are good right now, with mortgage rates at historic lows ... If you wait because you think prices still have further to fall, you could find in a few months that the cost of borrowing has gone up. Any savings you might have made on the purchase could well have been cancelled out by higher monthly mortgage payments.

“Ask yourself why you’re buying a property. Most people are buying because they want a home and aren’t looking to make a quick profit. Even if you do buy now and prices fall a little further, it’s unlikely to impact you if you’re not planning to move for a few years. Owning a property has proved to be a good long-term investment, so as long as you’re not short-term speculating, then monthly property price movements shouldn’t be an issue. What will impact you more is missing out on that dream family home because you were hoping to pick it up for a few thousand pounds less by delaying.”

• Reuben Young, director of campaign group PricedOut

We need to build more homes

“We’ve got ourselves into an impossible situation. Because successive governments have failed to build enough housing in high demand areas, house prices are outrageously high, preventing young people from accessing home ownership. Every penny that they rise make it harder for aspirational young people to realise their dreams (and to escape a broken private rented sector). House prices cannot be allowed to inflate further.

“But meanwhile, the UK’s economy – particularly the banking sector – has interwoven itself with house prices so intimately that a large scale and sudden drop would have catastrophic effects on confidence and investment, including housebuilding. The solution is to build enough homes in areas they’re needed so that house prices stop rising, allowing wages to price back in more and more people over time.”

• Mark Harris, chief executive of mortgage broker SPF Private Clients

Negotiate hard on price

“If you are buying a home, the price at which you purchase it is not hugely important in the scheme of things. During your ownership of the property, prices may rise and fall, but as a long-term investment the trend has always been positive, and it is more than an investment, it is a home.

“Delaying a decision to buy might not always be possible, depending on your circumstances. If you are moving out of rented accommodation, you would have to give notice, for example.

“That said, if you are buying now, I would negotiate hard on the price you pay.”