Acadametric figures showed that house transactions in England and Wales fell to around 43,250, the lowest level of properties sold in May over the last 15 years. May’s figures were only 46% of the long term average of 93,860 properties sold in May (1995 – 2009).
The average house price in May was £220,352, 5% below the peak in February 2008 of £231,828. Regionally, prices fell in all areas, from a 2% decline in the East Midlands to a 0.1% fall in Greater London.
The rate of annual price increase is now 9.7%, but has begun to slow from its peak in February 2010.
Dr Peter Williams, chairman of Acadametrics, said: “Perhaps unsurprisingly, given the widespread uncertainty that exists, the housing market dipped in May.
“With prices starting to fall, there will be a number of homeowners who continue to experience negative equity on their property purchase, with house prices returning to the same level as they were in March 2007.”
He added: “The problem for these owners will be that, if they need to re-negotiate their mortgage at the end of its first term, their lender may be willing to offer only a lower LTV loan. Negative equity is also a factor in loan modification and repossession cases with lenders being reluctant to crystallise losses.”
Williams commented that the fragile state of the market means is it easily affected by change, highlighting factors such as the supply of housing increasing in May as the Government announced the suspension of Home Information Packs (HIPs) and proposed increases in Capital Gains Tax (CGT). New mortgage lending was also lower than expected and remortgaging levels remained very low.
However, Williams added that whether this decline is the beginning of a trend or not is up for debate.
Williams said: “Clearly, the emergency Budget on 22 June will offer some clarity, not least on CGT but also on other tax rises and expenditure cuts. More positively, we may see new measures introduced to help buyers, although whether these will in themselves overcome the continuing shortage of mortgages is another question.
“That issue remains unresolved and whilst there is a recovery in savings and some modest evidence of faster debt repayment, the lending industry is still expecting to see total gross lending of around £150/160bn for the year and net lending (this is the total minus repayments) of around £15/20bn, well below anything that might be deemed a level of funding for a “sustainable and healthy” housing market.”
