Owners forced to sell property at discount in UK

Owners have to sell their properties at 10 per cent discount to the market rate in the United Kingdom in order to sell it, according to the latest housing survey from the Royal Institution of Chartered Surveyors.

Stuart Allan, a RICS member from Bishop Auckland in Co. Durham, told daily Telegraph that there is a dearth of first-time buyers principally due to difficulties in obtaining mortgages and this has depressed the value of houses at the lower end of the market.

“These houses are typically selling for up to 10 per cent less than the estate agents advertised prices and this is reflected throughout the market.
“Vendors or property are required to be more realistic in their sale price expectations.”

Property prices in the United Kingdom dropped more than 30 per cent last month and are expected to fall further in the last quarter of 2010 and next year, analysts and economists said.

Around 32 per cent real estate agents reported a fall rather in house prices in August against eight per cent in the previous month, according to the latest housing survey from the Royal Institution of Chartered Surveyors (RICS). That is the lowest reading since May 2009.

Tom Goodley, a RICS member form Norfolk, said: “There appears to be a lot of overpriced houses on the market, and a shortage of buyers. The basic economics of supply and demand must prevail.”

The share of the market occupied by first-time buyers dropped to 34 per cent in July, down from 38 per cent the previous month and the lowest proportion since the beginning of the credit crisis in August 2007, according to the Council of Mortgage Lenders.

First-time buyers are struggling to get on the property ladder as banks further tighten lending criteria.

These buyers have a typical deposit of 24 per cent of the value of their home, up from 21 per cent in April.

The CML also disclosed an increase in the number of loans approved to those buying a new home to 56,000 in July, up from 52,000 in June - although this remains significantly below long term averages.

Howard Archer, of economists Global Insight, said: “This mortgage data for July remains very low compared to long-term norms and does little to dilute suspicion that house prices will remain under pressure.

“It is also notable that mortgage approvals to first time buyers actually weakened in July, which suggests not only that they may be becoming more reluctant to move into the housing market in the current uncertain economic environment. It also suggests that first time buyers are finding it hard to get mortgages.”
Archer said property prices are likely to fall around three per cent in the last quarter this year a further five per cent in 2011.

"On balance, while we believe that a sharp correction in house prices is unlikely ... we believe that they could be some 10 per cent lower by end-2011," he said.

Archer's predictions come the day before the Royal Institution of Chartered Surveyors (RICS) releases its latest housing market survey. He said the survey was likely to show that the supply-demand balance in the housing market was continuing to move "more in favour of buyers".

"The July RICS survey showed that the number of new properties coming on to the market had risen at the fastest rate since May 2007," he added. "This is particularly significant as a shortage of properties was a major factor in the recovery in house prices from their early-2009 lows."

"Housing market activity is currently low, the economic fundamentals for the sector are far from ideal (notably high unemployment and muted wage growth), a major fiscal squeeze is getting under way, and house price/earnings ratios have moved up overall from their early-2009 lows and are above their long-term averages.

"On top of this, credit conditions remain tight with mortgages still hard to get for many people. Meanwhile, more properties have been coming on to the market for some time now, thereby moving the supply/demand balance in favour of buyers," he added.

The mortgage market remained weak during July despite a slight rise in the number of loans advanced to people buying a home, figures showed.

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