The number of home sales in 2011 has significantly declined from the previous year’s numbers. When comparing the number of homes sold in England and Wales in July 2010 and July 2011, the difference was 11 percent. This number equated to approximately 59,919 compared to nearly 150,000 homes sold at the peak of the market in the UK.
While the housing prices on dropped by 0.3 percent in September 2011, the overall annual price was reduced by 2.6 percent. The average home price in September averaged 162,109 pounds. The Northeastern region of the area decreased an average of 8.2 percent. The only location in the UK that experienced an increase in housing prices was London. In London, the prices rose by 2.7 percent on average.
Some experts attribute the decline in sales and home prices to the low supply and low interest rates. Low supply typically means a higher demand. In this market, the two did not quite go hand in hand. Confidence in the housing market is low. Transactions levels are also low. Experts are noticing that nearly a third of sales are falling, because first time home buyers cannot secure proper financing through mortgage companies.
People that are putting their houses on the market are pricing the houses aggressively to accelerate the selling process. Homes have been sitting on the market for many months. Sellers do not desire this scenario. The prices are set low to encourage buyers and faster sales. Since August and September, there have been very few inquiries regarding home buying. Experts have examined numerous items to stimulate the market including reducing interest rates, but nothing seems to work. Banks such as ING Direct, Northern Rock and Santander have all offered mortgage deals for new customers. The Bank of England has one of the lowest interest rates at 0.5 percent.
Short term loans are increasing, and the interest rates on long term loans are decreasing. Experts expect the rates to remain around 3.5 percent for a while. This is not good news still for many young people and first time home buyers that have been locked out of the housing market due to the job market. This has been one of the most difficult job markets in years. Young people cannot buy homes because of the uncertainty of the job market. If they buy and lose their jobs, they may foreclose on the home. Saving for a deposit on the home is also difficult. According to the Office of National Statistic in 2008, the household savings ratio was at a record low of 1.7 percent.
There have been some reports of savings levels rebounding. The household savings levels are up to 7.4 percent from 5.9 percent earlier in the year. When some people are prudent and saving money, this helps banks but does not help stimulate the economy. The paradox of thrift comes into play and home sales decline.
Older people are plagued by higher electricity, higher heating bills and a decline in property values. This generation are investing in properties and trying to build wealth. Those that have the money to invest in this market will force lower income groups to struggle and become a part of “generation rent.”
Experts expect that housing rates will rise after the unemployment rate drops below eight percent that sales will increase. Until that time, people will continue to live together to save money. People avoid foreclosures, while saving money.
Conclusion
The UK housing market is showing signs of improvement, but only time will tell whether the improvement is temporal or long lasting. Britain was once considered a safe haven, but is now not a safe haven. Consumers have to consider other options until the market rebounds.