The Daily Post today begins a week of special reports on the state of the region’s property market. In the first part, David Bartlett examines signs of a slowdown in residential sales
MORE than £1bn of residential property deals were done across Merseyside and Cheshire this summer.
The figure, based on Land Registry figures for everything from semi-detached homes in suburbia to luxury city centre flats, provides a snapshot of the region’s housing market.
The total amount that changed hands between April and June was £883m for the L and CH postcode areas alone.
If places like Southport, St Helens, Warrington, and Halton were included, the total number of deals would be in excess of £1bn.
However, there are signs a slowdown in the market has already started, as the amount of money that changed hands in the area was down 2.4% compared with the same period last year. It comes as economists warned the recent crisis engulfing mortgage company Northern Rock could further dampen the market.
In terms of volume of sales, the number of properties that changed hands in the L postcode area, which includes Liverpool, Knowsley, West Lancashire and parts of Sefton, were down 9%.
The number of sales in the CH area, which includes Wirral, Chester, Ellesmere Port, and Neston was down 5%, year-on-year.
The average house value in the L area now stands at £142,000 and in the CH area at £170,147, both have risen by around 5% year-on-year.
While prices in the L postcode rose across the board, apartments in the CH area (excluding north Wales) saw a drop of 5.66% in their value. The downturn was a result of problems of affordability and interest rate rises starting to bite, said estate agents last night.
And Merseyside economist Peter Stoney warned the slowdown was likely to become more marked in the next two years, although a crash could probably be avoided provided interest rates and unemployment levels remained stable.
“It’s quite clear there’s going to be a slowdown in housing sales and prices will flatten off and start to come down,” said Prof Stoney, honorary senior fellow at Liverpool University’s economic department.
“The gradual increase in interest rates to 5.75% is a factor in this, as is the rise in prices of basic necessities like bread. Basically, people are feeling the pinch.”
Mr Stoney said the figures compiled by the Daily Post showed the slowdown had already started.
In the L postcode area, which includes all of Liverpool, parts of Sefton, and West Lancashire, there were 9% fewer home sales in the second quarter of 2007 compared with the same period in 2006. A total of 3,164 homes were sold in the L postcode area from April to June, compared to 3,480 in the same period last year.
In the CH area covering the Wirral, Chester, Neston and Ellesmere Port there was a 5.8% drop with 2,700 sold in the second quarter of 2006, this year it fell by 158.
The area to see the largest decline in sales was the apartment sector in Liverpool, which fell by 30%, with 186 fewer sold in the period.
Across the board, prices did increase, but the apartment market in both postcode areas showed signs of decline.
In the CH area, the prices of flats fell by 5.66% and in the L area there was a marginal 0.29% increase. “The upshot of all this will be a gradual levelling off and stability in prices, and the market may start to stagnate,” said Mr Stoney.
“The slowdown could also become much more marked over the next two years.
“I think interest rates have peaked. It is a buyer’s market, so if it’s good to buy at the moment it’s going to get better in the next 24 months.”
He said although the full effect of the US sub-prime crisis and the trouble surrounding Northern Rock were not fully known, a crash was not on the cards at the moment.
Homeowners and those keen to get on the market should not be too depressed, though, he said, as it was not all bad news.
“The encouraging thing is that unemployment is still going down, and there is a correlation between unemployment and the housing market,” added the senior economist.
“I don’t think we are going to see a crash, certainly not in the foreseeable future.”
Mr Stoney’s comments were echoed by estate agents across the region who said less sales meant homes were staying on the market longer, and conditions now favoured buyers.
“At the moment, the market is realigning, but the long term is very positive,” said Paul Sutton, of Sutton Kersh estate agents.
“This is a plateau but there is a continuing upward demand for property and it will remain a popular investment.”
However, he said the market in Liverpool, in which his company specialises, had grown astronomically during the latest boom.
“The growth of the property market in Liverpool is indicative of the wealth of the city as a whole.
“It’s fair to say property remains on the market longer now as the split between demand and supply is more even.
“Buyers are now in a position to negotiate a choice of property that was denied to them three years ago.”
Despite a smaller number of sales, prices did continue to rise over the past year, during which the Bank of England added 1.25% on to interest rates.
Detached houses increased in price 14.5% in the CH area to an average £314,295 and 6% in the L postcode to £282,296. The average semi-detached home in the L area now costs £162,267 an increase of 5.9% on last year, and in CH a typical semi changes hands for £167,753, up 2.6%.
Terraces also saw their value grow. In CH areas, the average terraced home costs £119,375, an increase of 7.3% and in the L area prices went up 9.5% to £102,343.
“We are not having any problem with properties up to about £180,000 and at the upper end of the market from £400,000 to £500,000 onwards,” said Liverpool estate agent Phil Furlong, of the Venmore Partnership. “The problem is that bit in the middle.”
This was primarily brought on by the lack of first-time buyers causing a glut further up the market.
Paul Lea, of Bradshaw, Farnham and Lea, which sells homes on the Wirral, said apartments had been hit hard because of their sheer number.
“There is huge supply, but not much demand.”
He said the 5% fall in apartment prices matched the 5% “premium” that buyers tend to pay for a new flat.
Conversely, the top end of the market was quite buoyant.
“My belief is that this year and probably next year there will be zero growth in the market, which is not a bad thing. It will allow wages to catch up.
Duncan Thomas, who runs a family estate agency covering Chester, said properly priced property was still selling well in his area.
He added: “People who are coming in to buy are well informed and are able to negotiate well.
“Prices are going to hold with marginal fluctuations.”
But Peter Horner, of Bakewell and Horner, who deals in Wirral, said the market in his area had become so slow that people selling semi-detached houses were now having to lower their prices by about 10%.
IN TOMORROW’S Daily Post: special report on Liverpool’s city centre apartments.