Uk Market on a knife edge as prices rise grind to a halt.
Investing in BP shares right now might see like a good idea, but ..................
Investing in BP shares right now might see like a good idea, but anyone in the City will say you should try to catch a falling knife. If Hometrack’s latest survey is anything to go by, perhaps the same should be applied to the property market. A house price correction seems almost inevitable.
In June, new buyer registrations ground to a virtual standstill, according to Hometrack’s figures, while the number of homes on the market grew by 2.9 per cent. House prices are still rising – they have been since last year – but the extent of the growth has slowed. Even in the most expensive parts of London, where Savills estate agency was recording growth of three per cent at the beginning of the year, price rises have ground to a halt. Yo9lande Barnes of Savills research team does not foresee a price crash but admits that the prime London market is at a tipping point. “A second slip rather than a double dip in values is now inevitable” she says.
‘If you find the perfect house, don’t be put off because values will recover next year’
There is definitely volatility in the market, agrees Lucian Cook, also of Savills research team. “In the mainstream markets transaction levels in the first five months of this year have been 25 per cent less than in the last five months of last year”, he says.
This slowdown has been taking place even though it has become easier to get a mortgage, which suggests that buyers are uncertain and deciding to sit tight. According to Cook, this sentiment will persist through the autumn, making this the third year with property transactions at half their normal level.
A potential dip is music to the ears of first-time buyers. But according to Roarie Scarisbrick of buying agents Property Vision, there is no question of falling knives in the property market as demand from international buyers is still strong in central London.
“There are knives in the Mayfair and Knightsbridge markets but not falling ones,” he says. “But there are fewer domestic buyers and there are opportunities appearing where vendors are motivated. If you believe the market is wobbling, learn lessons from the last crash and only buy the very best property.”
David Adams of Chesterton Humberts believes that the property market is on a knife edge, but doesn’t expect a crash.
“There is a five per cent correction underway in the South of England “he says. “And there may be a larger correction in the North of the Country and Scotland.”
But prices won’t dip too far because bricks and mortar are still seen as a good investment. “In these times of uncertainty in both financial and currency markets, property, and certainly central London property, is Europe’s new investment bank,” he says.
Whether or not this is the case, more houses on the market means more choice for buyers across the country. But shouldn’t buyers hold back until prices have hit rock bottom? Not necessarily, Cook says. “If your sold aim is to buy at the lowest point in the market, six months’ time might just be better,” he says. “But although there is a risk of softening prices in the short term, over medium term the prospects are much better, especially given the outlook for interest rates.”
In other words, don’t allow this latest house price dip to stop you buying your dream property. “If you find the perfect house, don’t be put off by the prospect of slight falls because values will recover next year and beyond,” Cook says.
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