Monday, September 21, 2009

Property shortage holds back UK market, Spain shows price falls

According to a report by Rightmove, reported in today's Daily Telegraph, the UK property market is suffering from a shortage of properties for sale. Estate agents have an average of just 69 unsold properties on their books, compared with more than 70 just a few months ago. These figures are significant in view of the closure of some 20% of estate agencies in the last 12 months.

Around 23,000 new homes are coming onto the market each week in England and Wales, the equivalent of 1.2 million a year, compared with the normal 2 million annually in recent years.

Price trends show a mix of falls, such as 3.6% in Yorkshire and Humberside, and rises of 8.4% in East Anglia during September, following a sharp drop during August. Taking the country as a whole, today's average prices are just 1.5% less than they were in September 2008.

Lack of choice in some areas, plus the demand by lenders for higher deposits, were both additional factors holding back the market, particularly among potential owners wanting to 'trade up' but deciding instead to stay put.

'Lenders' says the report, 'quite naturally prefer to lend to lower risk borrowers in better locations, with better job security, larger deposits and more resilient property values'.

In a programme on French television last night (Arte, Channel 5) about the situation in Spain, thousands of properties remain unsold across the whole of the country, largely as a result of over-supply. However, dramatic price falls of 20 or 30 per cent are helping fuel a demand for seafront apartments and villas on the Costa Brava, just 50kms from the border with France.

However, Spain has an estimated 1 million newly built homes awaiting buyers, of which 500,000 are located on the Mediterranean Costas. Although many are now heavily discounted, bargains are sometimes not all they seem.

Food and household shopping in Spain have traditionally cost less than in France, while Spanish property prices have generally been ahead of those for equivalent properties on the French Mediterranean coast. Many reductions in the price of Spanish coastal properties merely reflect this reality.

This is particularly the case in Pyrénées-Orientales just the other side of the border with Spain, where correctly priced properties have generally held their value.