It’s not a bad news for residential landlords that house prices fall again. The recent survey reported that house prices fell by 2.5 % in May. They are also 4.4 % lower than this time last year, but remain 5 % higher than two years ago with the average price now £173,583 which is £8,000 less than this time last year.This means that while some landlords have seen their investments decline in value other cash rich landlords may be able to increase the size of their rental property portfolios during the housing slump by negotiating favourable purchases at a time when lenders want larger deposits before agreeing a mortgage.The credit squeeze has also made it increasingly difficult for first time buyers. This has also benefited landlords as rental incomes have risen.Fionnuala Earley, Nationwide’s Chief Economist, said: “The pace of house price falls accelerated in May as more weak economic news added to the gathering momentum of negative sentiment about the housing market.“House prices fell by 2.5 percent during the month, the largest recorded monthly fall in the history of the Nationwide monthly index.
At seven months, this is also the longest consecutive period of monthly falls since 1992. Prices have fallen 4.4 percent since this time last year, the biggest annual fall in house prices since December 1992 when prices were falling at an annual rate of 6.3 percent.“However, the strength of house price growth up until last year means that prices are still 5 percent higher than two years ago and 10 percent higher than three years ago.“Problems in credit markets have clearly been the trigger for changing fortunes in the housing market and while it is never wise to place too much weight on one data point, the apparent speed of the adjustment may lead the MPC to look more closely at the balance of risks to inflation in the medium term.“A further fall in house prices in May was not unexpected, and for most of those not wishing to move house or borrow money secured on it, the fall in value of their home is likely to be of limited concern in the short term.
Another agent, Jones Lang LaSalle, expects a decline in prices of between 7 percent and 9 percent this year, though the company believes this will vary considerably by region and by market.Their spokesman, James Thomas, said: “The housing market will remain weak in the coming year, but will recover strongly thereafter. We do not believe there will be a general de-rating of residential property in the UK nor do we view house prices as fundamentally overpriced, though we do concede that house prices have recently become overheated.“Most importantly we are confident that house prices will recover strongly in the medium term.”Commenting on Nationwide house price figures, David Stubbs, RICS senior economist said: “The difficulties in the mortgage market are stretching accessibility and threaten to reduce transaction levels by 40 percent this year. With buyers unable to secure financing on reasonable terms, some sellers are now choosing to cut prices. The market will only stabilise once transaction volumes recover.“The Government and the Bank of England should continue to implement measures to restore the smooth functioning of the mortgage market, before the drop in transactions and prices begins to really hurt the economy.”
source: http://www.residentiallandlord.co.uk
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