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AtW
20th June 2005, 16:07
Property faces 7-year hitch

Prices expected to grind to halt after survey reveals that house inflation has fallen below wage increases

Ashley Seager
Monday June 20, 2005
The Guardian

House price inflation has fallen below wage increases for the first time this decade and the property market could remain in the doldrums for up to seven years, property website Rightmove.co.uk warns today.

Rightmove's latest monthly survey shows asking prices for houses had edged up 0.2% on the month before to stand 2.4% higher than a year earlier, down from 4.9% in May and the lowest this decade. Wage inflation is running at above 4%. Rightmove, which monitors half of the country's asking prices, predicted the house price figure would soon fall to zero.

"This year's traditional spring bounce in asking prices has ground to a halt. Sellers have belatedly realised that buyers are unwilling or unable to pay ever-increasing prices," said Miles Shipside, Rightmove's commercial director.

"Having had it so good for many years, it's now payback time for the property market."

Rightmove said that in 2004 it had taken successive rises in interest rates, to 4.75%, to contain sellers' enthusiasm for raising their asking prices. This year it has petered out without any rate rises, it said.

First-time buyers - the main prop of the property market - remain priced out, Mr Shipside said, adding that at current rates of pay rises, it would take seven years for the "affordability gap" to be closed, assuming house prices don't fall.

If interest rates were cut by 1%, this could reduce that time to four years. Either way, Rightmove is expecting several years of subdued housing market activity.

A growing number of City economists think that the slowdown in house prices over the past year, combined with a sharp drop in consumer spending, could soon provoke the Bank of England's monetary policy committee to cut interest rates.

The slowdown in the housing market is particularly acute in London, where prices are the most expensive. Asking prices fell 0.7% on the month, reversing May's 0.7% rise, while the annual change showed a fall of 3.1%, the second consecutive drop. The most expensive boroughs in the capital, such as Kensington and Chelsea, have experienced the biggest falls.

In most other areas of the country the market was either static or slightly higher in terms of asking prices. The strongest monthly rise was seen in the north, up 2.9% on the month.

Economists are divided as to whether the housing market, which has seen prices triple in the past eight years, will remain stagnant while average earnings catch up, or fall sharply.

Some think that when most of the big house price indices, such as the Halifax and Nationwide, fall to zero this autumn, the market could suffer a psychological blow. There are also signs that unemployment, after years of falls, is starting to rise again, which could also undermine confidence in the housing market.

The Bank of England, in its quarterly bulletin today, publishes research showing that the slowdown in the number of house sales is unlikely in itself to have a big impact on spending by homeowners on durable goods such as fridges and washing machines which people often buy when they move home.

It did acknowledge, however, that there were other ways in which house price changes can affect consumer spending but said the links are less straightforward than commonly supposed.

The Bank's governor, Mervyn King, has admitted that the monetary policy committee has been surprised at the speed with which consumer spending has slowed this year and that the link between house prices and consumption may be stronger than the MPC had thought.

sasguru
20th June 2005, 16:22
zzzzzzzzzzz.......

Ivor bigun
20th June 2005, 21:15
If House Prices go down for the next seven years then that means there is seven years waiting before you buy your dream house - oh dear - tick tock tick tock.

AtWaT
20th June 2005, 23:53
He doesn't no need to wait 7 years.

The dream home is still awaiting....
www.argos.co.uk/webapp/wc...from=image (http://www.argos.co.uk/webapp/wcs/stores/servlet/ProductDisplay?storeId=10001&langId=-1&catalogId=3151&productId=128182&clickfrom=image)

just need to find a farmer with so much land, he wouldn't even notice it.

laminate flooring, 2 way-internet broadband via satellite, spunk rag and bucket to go.

FrancoLondinium
21st June 2005, 00:01
" He doesn't no need"

- He doesn't no need -.

No capital letter at the beginning of the sentence, no attention for spelling and punctuation. Am I the only one to smell Milan? :D

mcquiggd
21st June 2005, 01:51
Well, im happy - found a wealthy Norfolk farmer to buy my house - at the asking price - for cash. Contracts exchanged.... kerching..... still waiting for the final profit after all costs are finally settled (all fees, moving costs, etc), but will be a minimum of £100k - not bad for my first house bought 4 years ago.

Im now back contracting, and loving it - ive been lucky enough to find a well run project team, with a well designed system with established boundaries of responsibility. And for the first time in 14 years, its actually a system to help vulnerable people, rather than simply make a profit for some multinational.

The PM speaks his mind, but knows how to treat people, and leads by example - he (being a rather strong guy!) personally carries new desks in for us to make sure we are all close together so we communicate and no one feels excluded. He knows the political game, but is also a 'person' too - he doesnt change the way he speaks to us in private when compared to how he speaks to management - for me, thats a VERY good sign.