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Housing market insulated from financial crisis

Housing market insulated from financial crisis

Category: Economy

Updated: 15/08/2011
First Published: 15/08/2011

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

The UK housing market will remain insulated from the jitters seen in the global financial markets, it has been suggested.

The asking prices set by new homesellers fell by 2.1% during August, but are unlikely to be overly affected by the latest bout of volatility in the markets, according to Rightmove.

Asking prices have fallen by just 4.1% since jitters first struck the financial markets in 2007, data from the property website has shown.

And even though year-on-year prices have edged down for the first time since September 2009, expectations are that the impact of the renewed financial turmoil is likely to be limited.

This is because prices are already 'bumping along the bottom' and transaction levels are low.

Over the past four years, Rightmove notes that the number of new sellers coming to the market remains subdued, at around 30% below 2007 levels, and is broadly matched by the number of serious buyers.

In addition, it says that with base rate now expected to be unchanged until at least 2013, the number of forced sales will be limited and mortgage rates will stay low for buyers with big deposits.

On the downside, a rise in unemployment might see repossession numbers start to rise.

Meanwhile, debt concerns in the Eurozone might affect the ability and willingness of banks to lend.

"We're in a 'limbo-land', where a restricted number of motivated sellers are trying to match themselves up with the similarly restricted number of financially capable buyers," said Miles Shipside, director of Rightmove.

"In many parts of the country transaction levels are limited to the number of sellers who are willing to price aggressively below the competition and can afford to do deals.

"It seems that this stalemate can continue indefinitely, until it is broken either by an improvement in upside factors, such as a relaxation of mortgage finance, or by a further marked deterioration in employment and a corresponding increase in forced sales at bargain-basement prices."

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