House Prices Fall to 2005 Levels

Land Registry figures released at the end of February show that house prices in the UK have fallen to the same levels they were at in March, 2005. With the average property now valued at just under £157,000, this represents a drop of 15.1% over the last year.

The move by banks in 2005 to replace income based lending methods with affordability calculations led to a boom in prices, with prices hitting a peak average price of £184,725 in January 2008. Since then, it has been downhill all the way.

The fall in average value, however belies some interesting trends in specific parts of the country. While around £1300 has fallen off the average house; in the East Midlands it showed a rise of 0.3%, and the Yorkshire area reflected no change in the average cost of a home.

The picture is somewhat bleaker in Wales, where prices fell by a massive 8.8% in the month of January to just under £115,000 for the average property; this is a fall of over £11,000 in one month. However, these figures are heavily influenced by the very low numbers of recorded sales during the month.

The most expensive place to buy a home in the UK remains London, where a fall of just 0.1% was recorded during January leaving the average property at £306,000. This is a similar level to that recorded in late 2006 in the same area.

While Estate Agents are talking of renewed interest in the market, few are admitting to greater sales. Mortgages remain expensive, and with banks showing no signs of increased lending this is likely to remain the state of play. There is little evidence, as it is, of an imminent change in the state of the housing market, and many experts in the field are predicting that when an upturn does come it will be gradual, rather than the rapid inflation in house prices seen in recent years.

The governments’ attempts to stoke up interest in the market have met with little response, yet some analysts believe there will be renewed interest thanks to the Bank of England slashing interest rates to an all-time low. However, buyers remain wary and are likely to do so while the need for large deposits is still the case.

Indeed, recent reports have indicated that a requirement for a 15% deposit may become the norm, and this will have further implications on house sales. Given that 15% of the average price is not far short of £25,000 it is difficult to perceive where such buyers are going to come from, especially with regard to those buying for the first time.

Unless one is absolutely squeaky clean credit wise and has access to such a sum, it is unlikely that a mortgage will be easily forthcoming.

It remains to be seen if the renewed interest in the market is a sign of a genuine wish to buy or if the low prices are enticing prospectors sounding out the market for bargains.

Related posts:
Agents report increased interest in property market


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3 Responses to “House Prices Fall to 2005 Levels”

  1. Eventually it will sink in that RECOVERY means not going back to where we were in 2007 but returning to normal sensible lending. The FSA have said that mortgages will be regulated in the future almost certainly on loan to income ratios of around 3.5. Currently lenders are lending sensibly which is why nobody can afford a property, but eventually Estate Agents and sellers will realise that sensible lending is here to stay and 3.5 one wage loan to income ratios or 2.5 two wages whichever is the highest is going to see 40 – 50% falls in house prices. Property prices increased 190% in 10 years due solely to irresponsible lending, it broke the banks, houses will not boom again.

  2. Can we not expect our housing market to begin to look more european in the near future, where one saves longer and buys much later. Isn’t the typical first time buyer in France or Germany about 40 years old, and as likely to build as to buy? It seems that with such large deposits required now, and house prices that are still high with respect to income that we too should be expecting much older first time buyers. Our trouble is that our rental market is not as secure or regulated as in europe.

  3. This post is really very appreciable.your post is very advantageous for me and very good.The FSA have said that mortgages will be regulated in the future almost certainly on loan to income ratios of around 3.5. Currently lenders are lending sensibly which is why nobody can afford a property,in the East Midlands it showed a rise of 0.3%, and the Yorkshire area reflected no change in the average cost of a home.

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