UK House Prices Dropping

By January 5, 2009Articles

North-east is worst hit by drop in house prices

Original story By Simon Briscoe, Statistics Editor at – Restructuring and additional comments made by

The nightmare situation of selling your property at a loss, due to plummeting house prices,  was a reality to more people in, Nottingham and Durham than anywhere else according to the FT research.

The research shows that 1 in 20 properties were sold for less than what they were bought for. Which if you consider many properties would have been purchased 3, 5 or even 20 years ago it shows that this figure would be higher if the research only looked at properties originally purchased within the last say 3 years.

This seems to suggest a further Northern Rock effect as the lender was particularly aggressive in chasing that market share with high performance in price rises through 2003 to 2005.

The north-east’s five postcode areas – Newcastle , Durham , Sunderland, Cleveland and Darlington – are all in the 25 per cent of areas with the highest proportion of properties sold at a loss.

Nationally, prices are now back to where they were in early 2007. But in the north-east, they are back to mid-2006 levels, suggesting that a greater proportion of transactions could be “under water”. And house repossessions could be on the rise in these areas. The data not surprisingly suggests that anyone who bought in the last two years in this area are more likely to be in negative equity than not.

The average loss in these areas has been 10% which also flies in the face of these weird and wonderful figures you see in the paper of 30% etc. Also this 10% figure is slightly skewed as some larger properties have lost a considerably amount more, so the figure for the average home will be less than 10%.

The FT analysis, based on information from UKValuation, a property data and valuation business, used Land Registry figures that record the selling price of every property in England and Wales . The previous selling price was identified for every property sold between January and the autumn. There is little incentive for conveyancers to submit the paperwork after a property sale, so it can be several months before the bulk of transactions for any period are recorded. The figures cover about 75 per cent of the year’s expected sales. The full year’s picture will not be clear for some months.

While damaging for those involved, only 10,000 of the 350,000 recorded property sales in 2008 were sold at a loss. That equates to nearly 3 per cent, but the proportion has risen close to 5 per cent in recent months as the squeeze on the market tightens. These proportions look to be increasing.

The areas where the smallest proportion of properties have been sold at a loss are predominantly around the South East. In Slough, Kingston upon Thames and Redhill, only one in 70 homes sold was done so at a loss – less than a third the proportion in Newcastle .

This mainly reflects the greater buoyancy of the market in the South East in 2007 – up by 13 per cent – compared with the 3 per cent rise during the year in northern England . The price declines in all regions seen so far for 2008 have been broadly comparable at between 6 and 9 per cent.

Evidence that losses on home sales were more frequent in northern England might suggest that home buyers with lower incomes and high loan-to-value ratios had fewer alternatives when they struggled to meet mortgage payments, said Malcolm Barr, an economist at JPMorgan. In the South East and London , “more of the people have more of a buffer to go if they lose their job”, he said. In poorer parts of the country, losing a job might mean that a homeowner could not keep servicing their mortgage.

Across England and Wales, relatively few households – 10,000 or around one in every 2,500 – have had to lock in a loss on a property sale, though that number is expected to increase sharply next year as more families try to sell in the face of weak prices. In some areas, such as Lincoln , Swindon and Northampton , the number of households that have already locked in a loss is higher at around one in 1,000. Not all of those who have sold at a loss will have acquired negative equity.

So it seems that there is still more bad news to come in 2009 with UK house prices crashing and house repossessions rising in some of the poorer areas of the country .

We hope that the reduced interest rates will creep into the market and bring down mortgage payments for those on tracker mortgages and those able to re-mortgage.