Silver linings appear as property prices continue to slow

By David Sewell Stevens Personal Finance Correspondent Thursday, 5 June 2008

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As sure as night follows day so does bust follow boom and bubbles always burst!

It certainly seems to be doing just that in the UK’s inflated property market with more and more reports of rapidly declining house prices, a slowdown in sales and a slump in planning permission applications.

Whilst different sources paint a variety of gloomy scenarios, the Land Registry statistics are pretty much the ‘gold standard’ for reliability and objectivity.

So when they state that everything points towards a weakening housing market you had better believe them.

Decline is slower

They back up the gloomy scenarios by telling us that April was the eighth month in a row of falling property inflation.

But reassuringly the report reveals that the rate of decline is slower than many other surveys suggest.

If that is a silver lining, it is a faint one.

Volatile

Property sales are falling generally, there is a credit crunch and the mortgage market continues to be volatile.

Mortgage lenders rapidly change their deal offers, often within a week or two of being launched, whilst rates seem to fluctuate with the weather.

Worrying times indeed for those who bought at the height of the market madness, as well as those with dodgy job prospects and huge mortgages to service.

Results of the Land Registry report also reveal:

• There is a 30% slump in sales
• The actual rate of decline is debatable but could be approaching 4% year-on-year
• There are regional variations, sometimes quite significantly so
• The mortgage market is volatile and lenders seem uncertain which tactics to adopt

Signs of bouyancy

More cheerfully, though, we are told that England and Wales still show signs of some buoyancy although there are big variations between regions and in London property prices are still higher than last year.

But there is a glimmer of hope to provide a good news angle.

More stable economy

All of this may well lead to more sensible lending and borrowing and – first prize – a more stable economy.

However in the short term, inflation, high interest rates and a looming recession indicate that the agony will not be confined to the housing market and that the whole economy may well cool down.

This would lead to a shift of the financial burden from younger and less well off people to older and wealthier people who might have been immune from the selective effects of the property crisis.