UK housing market ‘in trouble’

Findings from's Home Asking Price Index have shown six out of nine regions in England registered a drop in asking price in September.

The asking price of homes in Greater London are falling fastest of all, by 1.2%, with the overall drop for England and Wales sitting at 0.4%. This equates to a loss of £1,030 in a single month for the average homeowner, while the average London property lost £4,208.

The recent international market upheaval seems to have been the catalyst for triggering this much-anticipated tipping point, as fear of default has forced mortgage lenders to price out sub-prime buyers with additional risk premiums.

“With wage inflation falling, interest rates rising, and house prices surging up for over a year, a correction was inevitable,” said Doug Shephard from “The housing market now looks to be changing rapidly to favour buyers over sellers.”

UK mortgage lenders were earlier criticised by a Financial Services Authority report in July for not properly checking the creditworthiness of homebuyers they were lending to. But this warning about irresponsible lending came far too late to avert a problem that has been growing for years – one which is estimated by the FSA to affect 8% of the mortgage market.

The sub-prime fall-out for UK house prices could be very serious, with fewer buyers able to raise finances and demand falling further. We could also see a negative effect on supply.

An increasing number of heavily indebted borrowers being forced to sell may trigger a further sell-off from property speculators wishing to reduce their debt burden as capital gains can no longer be made.

The report concludes that until the balance between buyers and sellers is restored, house prices will continue to slide. A cut in the Bank of England base rate could give some temporary respite to homeowners but that could let inflation off its tight leash and land the economy in much deeper water.