LONDON – British property prices have fallen sharply in the past few months, with a rebound in the second quarter of the year due to stronger-than-expected demand.
The fall in property prices could be the start of a long-term trend of a fall in the value of homes, as people start to wait longer to buy.
Britain’s housing market is facing the biggest fall in value since the financial crisis, with prices dropping by around 25 per cent in the first quarter of this year, according to the British Home Buyers’ Association (BHBUA).
The BHBUA said that the number of properties listed in the last 12 months had fallen by a staggering 40 per cent compared to the same period last year.
It said the slowdown was driven by “a steep drop in demand for properties in London” and the rise in the cost of mortgage payments.
The housing market has been hit by a wave of low interest rates, which have encouraged people to wait until they are ready to buy to secure a mortgage.
According to data from the Office for National Statistics (ONS), a third of the total UK population is expected to be aged under 35 and around a quarter of households are expected to live in poverty by 2060.
Despite a rise in house prices, the number and price of homes is set to continue to decline in the next few years, the BHBAA warned.
A slowdown in demand could see prices fall further, leading to a further decline in home values, the group said.
In the meantime, there is a danger that the slowdown could be offset by the fall in household wealth.
Property prices fell by almost 40 per in the three months to January, down from 46.7 per cent a year earlier.
However, the real estate agency REIN said in a statement that this was still a healthy recovery for the market.
“The housing recovery has been slow and the underlying demand for housing is strong,” said Neil Hunt, the chief executive of REIN.
There is no immediate sign that the global economic slowdown will cause a further fall in house values, said Nick Wood, an economist at Capital Economics.
But he said that it would be a very welcome sign that home prices had been growing in the face of falling demand.
“It will be a boost for people looking to buy a property but we think it is important to note that the rebound in house value is driven in part by stronger demand for homes in the UK, and is also likely to continue as the recovery proceeds,” he said.