Sales fell by 17.5% and prices declined £400 month on month but prices are up 1.1% on last year, the latest LSL/Acadametrics index shows.
The upper tier of the market is more resilient and there is a regional disparity of annual house price rises. Those with the highest average prices, Monmouthshire and the Vale of Glamorgan, saw the largest increases, while Blaenau Gwent, with the lowest average price, saw the biggest fall, highlighting the two speed nature of the Welsh housing market.
‘A combination of a constrained mortgage market for first time buyers and adverse weather conditions dampened housing market activity in April. Several parts of Wales saw twice the normal amount of rain in April, restraining buyers’ enthusiasm for viewing properties, and this has hampered competition for properties on the market,’ said Richard Sexton, director of e.surv, part of LSL Property Services.
‘However, the longer term effect of the absence of thousands of first time buyers still struggling to secure mortgage finance continues to be felt throughout Welsh housing market, reining in house sales and keeping prices deflated on a monthly basis. As a result, transactions fell by 17.5%, more than three times the seasonal drop we would normally anticipate,’ he explained.
He pointed out that lenders are facing strong pressure on their ability to lend, as a result of the ongoing financial crisis abroad, and have adopted an incredibly cautious stance towards those without substantial deposits and spotless credit. ‘As a result, many Welsh first time buyers may feel that home ownership is a distant reality. Nevertheless, some relief may come from the Bank of England’s new funding for lending, which, if successful, could allow mortgage lenders to pass on more affordable rates to new buyers,’ Sexton said.
‘While house prices in Wales dropped by £400 on a monthly basis, the annual improvement points to resilience in some parts of the market. Wealthier buyers and equity-rich retirees remain a key driving force, with activity at the top end of the market comparing favourably to a year ago, after the trough caused by the new, higher stamp duty on purchases over £1 million,’ he added.
The annual figure is up, whilst the monthly figure is down, because of what happened in the housing market in Wales in February, March and April last year, according to Peter Williams, housing market specialist and chairman of Acadametrics.
‘The Chancellor had announced that the stamp duty on properties costing £1 million or more was to increase by 1% from 06 April 2011. This resulted in buyers at the top end of the market bringing forward their purchases to the early months of 2011. Average prices in February in particular rose against trend by 0.5%. In April 2011, once the tax had been introduced, purchasers of high priced properties became conspicuous by their absence, with a consequent fall in the average price of a home of 1.3% in the month. By April 2012, the top end of the market had returned to more normal levels, so average prices have increased over the year, particularly when compared to April 2011,’ he said.
‘One of the features of April in Wales has been a decline in the number of properties sold amounting to a fall of 17.5% from March levels. On a seasonal basis the number of properties sold in Wales typically falls by 5% during April, so this year the market is more subdued than usual,’ he added.
He pointed out that some of the decline in sales can be explained by an absence of first time buyers, who continue to find it difficult to obtain mortgage finance, which has a knock on effect all the way up the property chain. The weather in April will also have had an impact on the housing market, with twice the normal amount of rain falling in South Wales and towards the English Border, making April 2012 amongst the wettest Aprils on record.
‘Looking at the seasonal trends in the Welsh housing market, one can normally expect sales volumes in May to pick up by 10% from April levels. It will be interesting to see whether May, this year, will follow tradition, or whether a more deep seated malaise has taken root. Early indications suggest that activity has increased, but we will have to see whether this has been sustained throughout the month,’ he explained.
‘It is interesting to observe that the two areas in Wales where average house prices area highest, namely Monmouthshire and the Vale of Glamorgan, are in the top three areas in terms of price growth. This is a trend which also applies in England where demand and, hence, prices have been strongest at the top end of the market. Apparently, existing owners are using the equity in their properties to upgrade their homes over the period, whilst new entrants at the lower end of the property market have found it difficult to raise the necessary finance to get started. Hence, the areas with the highest priced homes have tended to see prices rise, or to remain stable, whilst the areas with lower priced homes have continued to see price falls,’ he added.
Activity in the housing market is likely to remain subdued this year for a number of reasons, he believes. ‘There is the overall slow down in the economy and associated loss of consumer confidence, there is the ongoing difficulties in obtaining mortgage finance, with relatively high deposit requirements continuing to act as a barrier to potential purchasers, there was the rain in April which will have discouraged many from carrying out property searches and lastly the Queen’s Jubilee and the Olympics which will both put a brake on property sales. We do not therefore foresee the property market in 2012 returning to anything like the levels of activity seen in 2006 and 2007,’ he concluded.
