House prices hit ‘affordability ceiling’ as buyers make low offers

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The rate of house price increases once again slowed in December, continuing a trend that started last summer, according to latest figures from Halifax.  Kensington-House

While prices may have risen 0.3% during the 3 months in question, it was the fifth consecutive month in which the rate of house price growth was lower on a quarterly basis.

Home sellers ‘delusional’

Halifax says that prices have hit an ‘affordability ceiling’ in many parts of the country, but nevertheless, home sellers are still ‘delusional’ about the sale price they can achieve.

There now seems to be a disconnect between buyers and sellers, as often happens at market turning points when sellers still think they’re going to achieve the same prices people were getting 6 months ago, and buyers take the opposite view as they sniff out bargains.

House price ‘carnage’ in central London

According to the founder of online estate agent, eMoov, Russell Quirk, there’s ‘carnage’ in central London. He told the Daily Telegraph “It’s a very mixed bag across the UK, with carnage in central London but some buoyancy in commuter land”.

He added “there is still some delusion among sellers and with flat growth predicted for this year [as a UK average] they need to reduce prices to stay in sync with the market and successfully sell their homes.”

Halifax blames low wage inflation

Over at Halifax, chief housing economist Martin Ellis, blames house prices far exceeding wage inflation in most of the country, saying “The deterioration in housing affordability as a result of rising house prices, earnings growth that has been consistently below consumer price inflation until very recently and speculation of an interest rate rise, have combined to temper housing demand since the summer”.

And in addition “The weakening in housing demand has led to a reduction in both price growth and sales in recent months.”

House prices and insurance

While a more subdued housing market, with falling prices in some areas, may be good news for buyers, especially those of the first-time variety, it doesn’t actually make any difference to the cost of home insurance.

When you buy a home, you’re paying the market rate, or at least what might be a price slightly above or below that figure, depending on how much you want the property and how much the seller wants to sell it to you.

The premiums your insurer charges you are worked out based on the risk the property presents to them, which depends on a variety of factors, from size and age of the home to crime figures in the postcode or even street it’s situated on.

But insurers’ analysis doesn’t take market value into account. And you certainly shouldn’t assume that the price you paid for your home is the total figure you need to insure it for. This figure should be how much it would cost to re-build your home from scratch, taking into account everything from what a builder would charge to architect and legal fees.

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