House Prices Levelling Out 26/04/2005

The UK housing market seems to be stabilising according to a survey taken by Hometrack, with the shift favouring the buyers as house prices began to level out.

The April survey shows that despite house prices falling for the 10th consecutive month, the market has begun to stabilise due to an increase in the number of buyers. There is still, however, a considerable oversupply of properties.

Hometrack's National Demand Index reveals the gulf between the number of properties on the market and the number of buyers, with properties reaching an index level of 175 and buyers at just under 100.

The survey found that the average house price now stands at £162,100 down from the peak figure of £167,700 in June 2004, showing the fourth decrease in as many months. Agreed sales were up by 9.4% following a 16.5% rise in March and a 36% rise in February, according to the survey which monitored 3,500 estate agents.

Despite the increase in the number of buyers, there are still negotiating discounts of more than 6%, due to the surplus of properties held by estate agents. The time it takes to sell a property remained stable at 7.4 weeks for April, but the average number of viewings per sale fell from 13.2 to 12.4, possibly due to the number of properties available on the market.

Regionally, 13 counties reported no significant change, 14 counties reported price rises and 31 experienced price decreases. The biggest rises were found in central London and the City (+0.6%), Dorset (+0.5%), and north London and Wiltshire (both +0.3%). The largest price falls were in Bedfordshire (-0.7%), Gloucestershire (-0.5%), Surrey, Oxfordshire and east London (all -0.4%).

Hometrack's housing economist, John Wrigglesworth, said: "Despite buyers returning to the market, there continues to be an excess supply of unsold properties." He believes that the market will remain in the doldrums until the election, when it should begin to pick up again.

"Post-election, whichever party wins, there is likely to be a bounce back in the market as the economic and political prospects become more certain, thus encouraging consumer confidence to return. There are no fundamental reasons why the market should not recover."

Mr Wrigglesworth is predicting that prices will rise by about 3% on the year as a whole, but City economists are not as optimistic. They remain fearful that another rise in interest rates from the Bank of England, which are expected after the election, could deal a severe blow to the housing market.