More changes in the UK housing market

No housing market has been under the scrutiny that the UK housing market has experienced over the last few years.  Every financial, property investing, moving, and travelling website has commented, to some extent, on the fluctuations in the UK housing market.

Most companies have experienced a housing boom, but few shared the experience of a continual increase, without ‘real’ fear of a crash.  That is exactly what is happening in the UK.  Even with houses in London at ₤1m, property investment websites, and real estate wealth blogs, and discussing whether it is possible to reap the same rewards buying in London as they would if they invested in property on Brazil’s Caribbean cost.

Once again the housing market makes the news as May experienced a drastic drop in activity.  Many are blaming this on increased house prices, others believe that potential home buyers are afraid of the high interest rates.

Hometrack, a residential property website, published the increase in house sales at 4.3 per cent this month, down from 9.6 per cent in April.  The number of new buyers registering with agents failed to rise at all.  This doesn’t mean that people have stopped buying. It just means that about 5 per cent of people theoretically decided to wait before buying their home.

Prices rose by 0.6 per cent over the month, slower than last year’s records.  The annual pace of property inflation surveyed by Hometrack changed to 6.7 per cent, from 6.8 per cent in April.  Only 34 per cent of postcode districts experienced price increases in May, compared with 44 per cent last month.

It isn’t that we haven’t been warned that a housing slowdown was on the way.  Everyone from the Bank of England to local newspapers have been predicting it with every percent the interest rate increased.

Some analysts are waiting for a clear signal may come when the Bank of England reports that mortgage approvals, an indicator of demand for properties, dropped last month.

Hometrack only states that the proportion of the country experiencing a boom in property shrunk – slightly.

Richard Donnell, Hometrack’s director of research, said: “The steady ratcheting up of interest rates was bound to take its toll eventually.

“We expect the headline rate of growth to slow relatively quickly over the rest of the year towards 4 per cent as affordability pressures put a continued squeeze on purchasing power and more supply comes to the market.”

Hometrack reported that supply is increasing as new homes hit the market as vendors in London and the South East try to cash in on strong market conditions.

This is entirely likely, as foreign investors continue to invest in the London housing market. 
House-price growth was led by London, the South East and East Anglia, with other regions experiencing only subdued house-price rises, Hometrack reported.

This leaves many Britons’ wondering why they are forced to pay more for a house because investors want to make a fortune from the UK housing market.  In the end, who are they making a fortune from?  The residents, or do they buy and sell between each other, increasing the cost of homes in London, and making it harder for families to afford a home?

The fact is, investors from around the world are profiting by the current housing boom in the UK.  The demand for homes in the UK has not been flamed into the world’s fastest growing housing price increased by immigration or people moving to London.  Homes in London have not breached the ₤1 million mark because people with City bonuses are moving closer to the square mile. 

Instead, several reports indicate that investors are driving the housing boom – many of them do not even live in the UK.  There is solid evidence that the buy-to-let market is driving the boom.  However, landlord statistics show that only 10% of the countries houses are owned by novice landlords who are investing in the buy-to-let market. 

The build of the big buyers are foreign investors who want a ’sure thing,’ and the UK housing market promises that. 

The debt mountain is making the UK market look attractive.  At least 33,715 mortgage possession claims were issued between January and March of 2007. This is 1% higher than in the first quarter of 2006 and 10% higher than the previous quarter.  These types of numbers attract investors who are more likely to hit the auctions instead of bid on houses through realtors.

As investors buy up the cheap houses at auctions, it reduces the number of homes available for first-time buyers.  According to the Department for Communities and Local Government (DCLG) the average house price was £214,424 in England in March. UK annual house price inflation rose by 10.9%. Annual house price inflation in London rose by 13.9%. 

These changes are affecting the housing market almost weekly.