LSL Property Services/Acadametrics Wales
· The average price of a house fell by £4,465 in 12 months
· But house sales up 23% in October compared with September as more first time buyers get a mortgage
Nigel Favas, Managing Director of Reeds Rains estate agents, who has branches in Wales comments: “The Welsh housing market is struggling due to the lack of mortgage finance for lower income borrowers, caused largely by strict lending criteria, and this contributed to house prices sinking for the sixth month in a row in October. Although sales activity increased by 23% between September and October, this says as much about the subdued number of sales in September as it does an improvement in the market. It is sobering that we are currently seeing lower house prices and this is the case in 18 of the 22 local authority areas in Wales.
“If we dig a bit deeper a slightly more positive picture emerges for first-time buyers. By and large, first-time buyers have been at the prickly end of a dysfunctional mortgage market since 2008. Yet unlike other parts of the UK, Wales has seen an overall boost in activity at this end of the market, although it is from a comparatively low base. The number of loans advanced to first-time buyers rose in the third quarter by 10% and on average, first-time buyers in Wales were able to use smaller deposits to secure a mortgage than in the UK overall. Welsh buyers have an extra advantage, particularly compared to their English counterparts, due to first-time buyer property in Wales being cheaper than other parts of the UK, meaning the necessary deposits that need to be set aside are smaller.
“A long term recovery in house prices depends on a substantial, structural improvement in the ability of banks to lend to first-time buyers. Lenders need more help to actually lend. Banks are in a tough place at the moment; feeling pressure to safeguard a certain level of capital that has led to strict lending criteria which in turn has stifled the lower end of the market. The Welsh government is taking steps in the right direction, with plans of new and affordable housing in Wales as part of a new strategy to encourage greater activity in the housing market. The launch of the mortgage indemnity scheme should help people to access higher loan-to-value mortgages from Spring next year. The government’s Funding for Lending scheme is expected to have an impact in the early months of 2013 but it will take some time before we can assess its true impact.”