New buyer enquiries went into decline, according to the Royal Institution of Chartered Surveyors
The housing market is signalling that UK house prices are going to crash as homes become more unaffordable: New buyer enquiries went into decline, according to the Royal Institution of Chartered Surveyors. Declines in new enquiries “are strongly correlated with price falls about a year later,” according to The Financial Times. Mike Prew, equity analyst at investment bank Jefferies, told the FT:
The balance of surveyors expecting higher house prices 12 months ahead has also collapsed, suggesting something more than just short-term factors.
The FT looked at a range of data — everything from how many people are looking to buy a home, to the percentage house price rise, and how much Britons earn — and found there is evidence that sky-high property price rises may be coming to an end.
Here are the key quotes from the report:
Paul Smith, CEO of the estate agency Haart: “We believe the nation has now neared the limit in terms of price rises.”
Richard Donnell, director of research at Hometrack: “There are plenty of headwinds facing London irrespective of the referendum vote. It’s down to affordability — at some point you have to run out of buyers.”
Lucian Cook, director of residential research at estate agency Savills: “We are clearly hitting some affordability ceilings in London.”
Henry Pryor, a buying agent: “How do you persuade people to buy something today that they think will be cheaper tomorrow?”
Basically, info from a range of experts, which you can read in full here, sets out a case that shows demand is tumbling, which will lead to a fall in prices:
“Inquiries declined in April at their second-highest rate since 2008, according to the Royal Institution of Chartered Surveyors.”
“Mortgage approvals across the country dropped 8.6 per cent in April.”
However, it is worth noting that this is likely to be affected by the government’s implementation in April of a new tax on people buying a second home. Various reports have shown a very clear drop off in instructions and people taking out mortgages during this time.
But overall, the affordability issue is driving the market.
The average house price in Britain stands at £292,000 ($428,451), according to the Office for National Statistics. Property prices in London are even more colossal, at £552,000 on average.
Over the last four years, property prices rocketed by 54% in London while prices across Britain jumped by 20%, according to the Land Registry.
Meanwhile, latest data from the ONS showed that wage growth slowed in the three months to February. Wages grew 1.8%, down from 2.1% in January, and far lower than the 2.3% growth expected by economists. On average, Brits currently earn less than £30,000 a year.
This is really screwing up the house-price-to-income ratio. London prices stand at 9.2 times average earnings, according to Nationwide data.
“Property prices would need to fall by up to 40%, or household income grow at ten times its current pace for the next five years, in order to bring the ratio back to balance,” according to macro-research firm Fathom Consulting.