Residential property sales in Wales were 5% lower than normal in March as first time buyers struggled due to banks reducing mortgage lending, according to the latest report from LSL Property Services.
Rising inflation meant that house prices are 3.9% lower in real terms that they were in January 2011 and the average property price has fallen £419, or 0.3% in the last 12 months, the index also shows. It means that the average home now costs £152,238.
‘Many Welsh first time buyers are having real difficulties in securing a mortgage at an affordable rate. The majority of them are being priced out of the market and forced to stay in expensive rental accommodation that is a black hole for their personal finances, making it even harder for them to save for a deposit,’ said Richard Sexton, director of e.surv chartered surveyors, part of LSL.
‘The lack of new buyers has caused house sales to drop well below their previous levels. It has put the brakes on activity further up the property ladder and caused the whole market to congeal. House prices are falling as a result. Adjusted for inflation, house prices have fallen by almost 4% in real terms since January last year,’ he explained.
He pointed out that the underlying demand is there. People want to buy, but they can’t because mortgage requirements are becoming steadily stricter. ‘Banks are consciously reducing their lending to lower income buyers, hitting Welsh buyers disproportionately, and will continue to do so over the coming months. The eurozone crisis has made it much more expensive for them to fund mortgages. They are covering off these extra costs by increasing rates and reducing the number of mortgages they grant to buyers with small deposits,’ said Sexton.
Things are unlikely to get much better this year. ‘House prices will be closely tied to events across the Channel. If the problems blighting the eurozone become more pronounced, banks and building societies will have to scale back their mortgage lending even further. This will reduce sales even further and knock chunks off the average house price,’ explained Sexton.
‘On a local level, the fortunes of house prices are heavily dependent on the performance of their immediate economies, and in Wales, this will particularly be influenced by the impact of public sector austerity and the threat of unemployment,’ he added.
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