More House Sales Falling Through
New research has been released which shows that there has been an increase in the number of house sales that fall through. This figure has been rising slowly for the past 18 months, with a couple of factors responsible for the trend.
The research, which was released by Quick Move Now, found that the number of sales across the country that don’t complete has risen at a steady pace since the first quarter of 2013.
Mortgage Rules and Declining Prices
One of the reasons behind those sales that fall through has been the changes that have occurred in the mortgage market. The new rules that were introduced earlier this year have made it harder for potential buyers to achieve the level of finance required. Buyers will put in an offer on a house with a stainless steel fabrication balcony, for example, with the expectation that their mortgage application will be approved. However, when they don’t receive a big enough mortgage, they have to pull out.
Over the past few months, the market has also seen a change in attitude on the side of the buyers. They are becoming increasingly worried that prices will begin to fall, and this is another reason behind the increased level of sales that fall through. They are concerned that as house prices rise, they will be left with a property that is worth less than they paid. At the start of the process, they try to secure their dream home, complete with an ornate stainless steel fabrication staircase, with an ambitious offer. As the transaction progresses, they feel they have paid too much in the current climate and withdraw from the sale.
House Prices Could Be Set to Fall
These buyers could be right to be wary about the current state of the property market. According to analysis from the Centre for Economics and Business Research (CEBR), prices will indeed fall in 2015. This won’t be a constant decline as seen during the previous crash. However, it will be a readjustment of the market, as prices rose too sharply this year. The market will then return to a period of growth by 2016.
This analysis predicts a rise in the market of 7.8% this year, which is over twice the average for 2013 of 3.5%. This rapid growth in house prices is preventing more first-time buyers from getting on to the property ladder. Coupled with tougher mortgage rules, they are now struggling to secure a big enough deposit and mortgage to buy their own home.
Buyers are also being cautious about the potential for interest rates to rise, which could cause problems for those who take out large mortgages. 2015 will see many buyers stall their purchase until they can see the effect of rate increases. If there are fewer buyers on the market, house prices will ultimately fall.
This fall in the market will only be a temporary drop. The CEBR predicts further growth of 2.6% for 2016, followed by 3% for 2017 and 2.7% for 2018.