Transactions hit a four-year low as Help to Buy owners are warned their homes could fall into negative equity

Falling sales and poor price growth could push those who used the Government’s Help to Buy scheme into negative equity, it has been warned.

Property investor London Central Portfolio’s (LCP) latest residential index for June found sales volumes across England and Wales are at their lowest level since the introduction of graduated Stamp Duty thresholds in 2014.

LCP said transactions in England and Wales have fallen 3.2% annually to 866,575.

In London, sales are at their lowest level since the financial crisis of 2008, down 8.5% in central London at 3,760, and falling 8% in Greater London to 87,080.

Price growth was also lacklustre.

Average prices in in England and Wales were up just 0.5% on a quarterly basis and 0.8% annually at £287,558.

In prime central London, average prices were 8.2% down annually and 6.9% down on the previous quarter at £1.7m.

Greater London bucked the trend, with prices up 0.6% annually to £628,807.

New-build price growth was more positive, reaching record highs both in London and across England and Wales.

PCL saw new build prices grow 7% annually to £3.2m, 10.1% in Greater London to £755,553 and 5% in England and Wales to £343,244.

Naomi Heaton, chief executive of LCP, suggested the sluggish transaction figures were due to a disconnect between asking and sold prices.

She said: “While these statistics do not reflect the discount from original asking price to sale price, a disconnect between seller and buyer expectations can be observed. This is undoubtedly a contributing factor to the sluggish level of transactions. Current annual sales have fallen 8% and now stand at 87,080, just above the levels last seen during the global financial crisis.

“With current residential tax policies and the lack of a defined plan for a post-Brexit UK contributing to economic uncertainty, it appears that only those who have to move are doing so. Falling prices will only exacerbate this as sellers are not motivated to move if they see the value of their home decline.”

She also warned the falling prices and lack of sales could also hit Help to Buy owners looking to sell.

Heaton added: “Soft prices and a general trend towards down-valuing properties could also have a concerning impact on the Government’s Help to Buy Scheme, which has enabled buyers to take a 95% loan. Existing owners may now find they are in negative equity when it comes to re-mortgaging their homes, with serious repercussions.”

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One Comment

  1. Will

    Am I reading this wrong? It looks as if the suggestion is sales are dropping, results in falling prices, possible negative equity in some parts of the market (help to by re-sales) and then saying down-valuations ? well does that not all suggest a recession is the market so perhaps the valuations are accurately reflecting lower prices? Would this not be a valuation reflecting the market conditions and not a down-valuation? Just food for thought.


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