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End-of-year rally can't mask falling house prices

Figures from Nationwide and Knight Frank show the property market is still struggling in most areas outside London.

 

by Michelle McGagh on Jan 03, 2013 at 11:00

End-of-year rally can't mask falling house prices

UK house prices fell 1.1% in 2012 despite a 0.5% increase in the last quarter, although London property did better and is edging close to pre-recession levels, according to Nationwide building society.

The Nationwide House Price Index shows 11 out of 13 regions in the UK saw house price falls in the past 12 months.

The average house price now stands at £162,924, down 1.1% on a year ago. Unsurprisingly London was the best performing region over the year with average property prices now at £300,361 after a 0.7% rise. The capital has seen the greatest recovery in prices, which are now 1% below their 2007 peak.

Northern Ireland was the worst performing region with house prices down 8.2% in 2012. The average house price in Northern Ireland is now £104,282, similar to levels to 2004.

Robert Gardner, Nationwide chief economist, said: ‘England continued to outperform the other home nations, with prices down 0.4% in annual terms. Wales was second, with prices down 2.7% over the year, while Scotland saw prices fall by 3.3%, compared with Q4 2011.

‘Northern Ireland remained bottom of the table, with prices down 8.2% on an annual basis.’

Gardner said London and the South West were the only regions to record price growth over the year and the North/South divide has been exacerbated.

‘Within England, the North/South divide in property prices continued to widen, with the price of a typical home in the South now around £95,000 more than in the North,’ he said.

The slump in house prices is even more pronounced in the Knight Frank Prime Country House Index, which shows prime country house prices fell 1.2% in the last quarter of 2012.

The index records an annual decline in prices of 3.8% and although prices remain higher than in the market trough of 2009, country property prices have been declining for seven consecutive quarters.

The increase in stamp duty for properties worth £2 million plus, from 5% to 7%, has meant homes in the £2 million to £3 million bracket have seen a fall of 5.6% in prices in 2012 – the largest decline recorded by the index.

Rupert Sweeting, head of Knight Frank's country department, said: ‘As with any market, be it wine, art or bloodstock, the best property has sold exceptionally well in 2012. This has been at all levels and the flight to quality continues, with the near fault-free houses or estates being sold under competition.

‘Often bidders have needed other parties to bid against to give them the confidence that they were not paying too much.’

12 comments so far. Why not have your say?

Forestbhoy

Jan 03, 2013 at 11:36

The prices that a lot of houses have been going for around here, is a lot less now,than the small decreases in that article would suggest.

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Jonathan

Jan 03, 2013 at 13:59

I'm not sure what's going to happen with house prices. My gut feeling tells me that there is a lot of pressure being put on them with the price of food and utilities rising faster than wages. But there is an awful lot of money printing going on right now which is the main cause of inflation which surely must eventually go through to affect house prices but at moment and at least until wages start rising I can't see house prices doing much at all.

It's going to be a very long dragged out correction.

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Derwent

Jan 03, 2013 at 14:16

We bought a house in 2012 (in Hampshire). Many of the asking prices were over the top and we had reasonable offers (90% to 92% of asking price) rejected by a couple of deluded sellers. We ended up buying a place at 83% of the original asking price. The other houses we offered on and most that we viewed back in May/June remain unsold. These stories of 1% declines don't equate to our experience and may reflect that actually hardly any houses are actually selling, i.e. many sellers have yet to adjust their prices to reality.

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Dislexic Landlord

Jan 03, 2013 at 14:29

What is a House worth ???? (outside London)

Quite simple what someone will pay for it

Its all about activity If its priced right it will sell

My own findingsare as follows

Look at the 2007 price and drop it by 30% to 35%

Or look atthe rental yeild that the property will bring and investor

Most property landlords want about 8% to 10%

so a property with £5000 income is worth £50,000

Now where are we going in the Future I think we will flat line from here for the next 5 yearsif nothing happens with Intrest Rates

If rates go up we will have another crash as repos come to the market

Ive always said there will be a Part 1 and a Part 2

Part 1 is where we are now

Part 2 will happen when intrest rates rise and we see lots of repos which will drag down the market which will effect larger houses more than smaller ones

We are no where near the end and the waters look very choppy for house prices

A house will always have a value we all need somewhere to live but at what price

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joe stalin

Jan 03, 2013 at 17:17

If I had heeded the endless doom mongering about house prices on this board I would not have bought into the house builders 4 years ago. I did n't.

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Dislexic Landlord

Jan 03, 2013 at 18:21

FAO Joe Stalin

You are indeed a wise man Buying Property will always be a good investment in the long run

Ive been buying since the crash in property prices and I will countiunue for the time being and makeing good money on yeilds

the problem is the short time frame and I mean 10 years here

Property will come back again is a good investment you just have to stand by your guns and take the drops which will happen in the next few years especialy if intrest rates do rise which they will

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John Wicks

Jan 03, 2013 at 20:09

Property is, and alwayswill be, a long term investment. Rental returns are minimal when taking out the running costs and maintenance. OK for the young who have time on their side. Not much good for the aged looking for a short term investment.

Relying on capital gain in this market is a long,long term dream. Looking for an income from rental probably comes under nightmare. Cheap property results in cheap tenants who usually are trouble. What do I know? Twelve years as an Estate Agent with around 100 rentals to look after taught me a great deal about property.

A home tolive in is one thing a property for investment is quite another.

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Dislexic Landlord

Jan 03, 2013 at 21:35

Hi John

I read you blogg with great interest

And I think you write sence

Ive been in this bussiness since 1982 and I have always said to new Landlords the easy part is buying the House now the real work begins

I take a great deal of time selecting Tenanats and I put them through stiff vetting incluiding Home Visits and Home owner Garantours I even do Police Checks with the Help of the Local Auth

And I can proudly say I have no Arrears and have very little Tenant Problems

I could write a book on the mastakes ive made over the years and I have learned by them too

Its all about being a good manager and agood Bussiness person who is good at customer service

Maybe you should become a Landlord Not a Manageing Agent If you were an owner you could run your own bussiness on your own terms

I think Agentsmust havea hard time especialy when you have an owner who will not carry out repairs and genaral oblagations of being a Landlord

I employ an agent and I work very closley with them although they can take the genaral strain of the everyday collecting of rents ect

Agents are the middle men and you get agro from both parties

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snowfire42

Jan 06, 2013 at 10:46

I would like John Wicks to write his experiences.Thanks

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rik

Jan 06, 2013 at 21:58

I think there needs to be a clear distinction between property as an investment, and ahouse as a home.

I have bought (and sold) in 2012, and at no time did I consider the potential financial benefit of the house I was buying, but only considered what it would be like to live in. Price is only then related to what I can afford, and like buying a car, I bought the best that I could afford to run and maintain.

I care not a jot about future house prices because (like most people) my property is my home and not an investment. I appreciate that some will own property to let as an income, but is this owned or mortgaged?

On the other hand, I'm pleased to see Tesco recovering! (an investment)

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Rightcharlie1

Jan 08, 2013 at 10:46

Currently, asking prices are too high, inspired by greedy estate agents and their propaganda! As stated above, prices are 10% below where estate agents are (mis) advising their clients. My sister was a victim last year (selling).

I work abroad and rent in the UK. I have been kicked out of two properties by greedy landlords; one who remorgaged the property to the hilt 2 years ago in the belief of capital gain last year - err wrong - and the other by a developer who has had to sell his main property to raise funds and downsized to the property his was renting me. He is in dire straights. A developer/landlord for over 25 years.

The bubble in London only caused by devaluation of the £ due to QE. Inflation higher than reported and only one way for interest rates. Everyone should step outside the UK for a moment and reflect back, away from the heartfelt propaganda, you will clearly see that a false platform has been created.

The landlord/developer above believes things will change, but not for 5 years. Maybe he is correct, I think longer because other baby boomers will face these same false dawns they have unwittingly created.

It has been a double dip recession despite political reports, so will it be with property, I agree with the above comment, stage 2 is on its way, probably 2nd quarter this year!!

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Jonathan

Jan 08, 2013 at 14:20

QE is devaluing money at such a rate it won't be long before everything seems cheap at today's prices, including any currently overpriced housing stock.

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