House Prices Dropping, but Bubble Risk still Looms

Monday, 26 May 2014

The year-long property boom has finally begun to lose steam, with the latest figures from Halifax showing that house prices have fallen for the second consecutive month. Although prices dropped by 0.2% and 1.2% in March, experts are warning that a property bubble could still be on the horizon.

According to Halifax, property is still in high demand. While the drop in price may be encouraging for those who fear that house prices are becoming unsustainable, the bigger picture tells a different story. Quarterly figures show that house prices have actually risen by 2.3% over the past three months, and are up 8.5% year-on-year.

Concerns about the predicted bubble are being laid at George Osborne’s door. In fact, three former chancellors have warned him to scale back his Help to Buy scheme, as they fear that the influx of new buyers, particularly in the South East, is fuelling the fire.

Lord Lamont explained his concerns about Help to Buy are based on simple supply and demand. While demand can be increased quickly by giving more people access to mortgages, supply can only be increased slowly with the building of new properties. Speaking to the Telegraph, the former chancellor said “my concern is that it will become even harder for young people to buy a home.”

The Royal Institution of Chartered Surveyors agree with his analysis, explaining that people are starting to panic buy property as there aren’t enough homes on the market. According to The Daily Mail, the number of properties coming onto the market has been falling consistently since the start of the year. Conversely, more people have been looking to buy, and the average number of homes sold by estate agents has reached a six year high of 23.

If you’re planning on buying a property this year, it’s important not to panic buy. Make sure the property suits your needs, is worth what you’re paying for it, and ask a surveyor to check it to make sure it’s in tip-top condition. This will reduce your chances of having to make a claim on your home insurance at a later date, as well as giving you peace of mind.


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