Britain's beleaguered homeowners will have to wait until 2014 at least before they see a rise in the value of their properties, as weak demand and tight lending conditions keep the market in check, a Reuters poll found on Tuesday.
Home prices, which have dropped about a fifth since their peak five years ago, will fall another 1.6 percent this year and only hold steady in 2013, according to the poll of more than 20 market watchers taken in the past few days.
In a March poll they were seen declining 2.0 percent this year and rising 1.9 percent next.
Housing has long been a bedrock of consumer wealth in Britain and average prices tripled during a property boom in the 10 years to 2007. But they are currently around 0.7 percent lower than they were a year ago, mortgage lender Nationwide said late last month.
“Some further downtick in property prices is expected this year amid weak demand and tight credit. However, a degree of undersupply in the market will prevent sustained sharp price declines,” said Melanie Bowler at Moody's Analytics.
The number of new homes being put on the market at the start of this month was the highest in two years, property website Rightmove said, but is still only about two-thirds of the mid-2007 level.
Demand has tailed off, despite record low interest rates, as banks have been reluctant to lend money to buyers, imposing harsh conditions on new mortgages.
Mortgage approvals, a good gauge of future housing market activity, aren't expected to rise much past their current rate of about 50,000 per month. The poll showed approvals at 52,000 in six months' time and 55,000 in a year - around half their average level during 2007.
The Bank of England has held interest rates at just 0.5 percent for more than three years and it is not expected to move them until 2014 at the earliest as it struggles to kick-start growth.
Britain's economy fell back into recession at the start of the year and it will see only tepid growth over the coming quarters, while unemployment levels have only nudged down from a 17-year peak seen late last year.
The weak outlook has been exacerbated by a tough government austerity drive to eliminate a budget deficit that was more than 10 percent of GDP when it came to power two years ago.
Housebuilders such as Barratt Developments and Persimmon have responded to the weak market and lack of mortgage finance by focusing activities on areas such as London and southeast England, where prices are relatively buoyant, and on more profitable houses rather than cheaper apartments.
Prices in London, where demand nearly always tends to outstrip supply, are expected to see gains of 2.4 percent this year and 3.0 percent next.
“We appear to have a two-speed market in which London performs well whilst more distant regions are less buoyant,” said Peter Dixon at Commerzbank.
But even in the capital there is a huge divergence among property prices.
Ten apartments in London's newest skyscraper, the 1,017-feet tall Shard, are for sale at between 30-50 million pounds each, which puts them at around 10 times the price per square foot of properties in the surrounding area.
The poll suggested British house prices were still overvalued in comparison with economic fundamentals, assigning them “6” on a 10-point scale where “1” is very undervalued, and “10” extremely overvalued.
The average price of a home in June was 246,235 pounds ($385,800), according to Rightmove, almost 10 times last year's average British salary of 26,200 pounds and out of reach of many buyers.
Twelve of 21 markets watchers expect further price falls from here, with most of them not seeing a stabilisation until later next year. - Reuters