New home prices take a summer dip

Despite record prices reported in May, new home prices took a tumble in June, with their average price falling 0.3% since the previous month, according to SmartNewHomes.com.

However, despite the summer lull, prices are still up on the previous quarter, and the same time last year.

Demand for family homes remains high

New townhouses and semi detached homes have recorded the biggest price increases over the last month, as demand for family homes remains high. Despite experiencing the biggest price fall in price last month, the penthouse remains the most expensive new home, with average prices in excess of half million pounds.

While the average price of a new home (stock price) has fallen marginally over the last month, the average price buyers are willing to pay (demand price) has fallen sharply as the impact of earlier rate rises has filtered through to the market.

The impact of earlier rate rises, combined with the continued fear of another rise before the end of the summer, has taken its toll on new homes prices as buyers remain cautious. However, despite the temporary slowdown in the market, which is not unusual for this time of year, the average price of a new home has shown positive growth over the last quarter and prices still remain up on those experienced at the same time the previous year.

Over the last three months, the average price of a new home has risen 1.7%.

For the second consecutive month, new home prices have experienced positive price growth over the previous quarter.

The average price of a new home has grown 0.6% over the previous year.

Despite a slow start in 2007, average new home prices are now experiencing positive growth, with prices up on the previous year for the third month in a row.

Despite achieving record prices in May, the new homes market has slowed in June, a trend that is not unusual for this time of year. With the severe weather conditions and freak floods recently experienced across the country, a strong price rise in July is unlikely, as buyers are deterred by the continuing bad weather.

Mass exodus in London fuels escalating prices in the east

Prices in London have fallen dramatically over the last year, with the price of an average new home down 11% since June 2006. However, despite the huge falls in price, London still remains the most expensive place to buy a new home in the UK, resulting in an increasing number of commuters now looking to areas outside of the city where they can still afford to buy. As a result of its popularity, house prices in areas such as East Anglia, which offers an easy commute into the capital, are now far out performing the UK average, with price growth of 14.6% over the last year alone.

In the north, buyers at the lower end of the ladder are still able to find a home under the minimum stamp duty threshold of £125k. As a result, the north continues to remain popular with new home buyers, at it continues to offer some of the lowest house prices in the country. In contrast, the UK’s most expensive regions – London and the south east continue to experience a mass exodus, retaining their position as the two least popular destinations with new home buyers.

For the first time in nearly three years, the south west has experienced outward migration, as its rising house prices, which continually outperform the UK average (now the fourth most expensive region to buy a new home in UK), begin to deter buyers from the region.

The new homes mix has remained relatively unchanged over the past year, with a marginal 2% fall in the number of apartments, counteracted by 1% increases for both detached homes and townhouses.

The increased presence of the townhouse and the detached home, among the new homes mix (at the expense of the apartment) is an indication that steps are now being taken to address the deficit of family homes within the current market. However, these small increases experienced over the last year are not enough to address the current imbalance in the mix and this trend must be continued if the UK housing market is to match growing demand.

David Bexon, Managing Director, SmartNewHome.com said: “With rates seemingly on the up and the sever weather conditions experienced in June extending well into July, I fear we should prepare for a further fall in price over the coming months.

“The recent flooding has devastated thousands of homes across the country, with the Department for Environment Food and Rural Affairs estimating the number of homes affected currently exceeding 20,000. For home owners in these areas, any plans for moving will be well and truly on the back burner.

“In addition, fear of another rate rise is still rife among the home owning public, with July’s rise only fuelling further concern. A growing number of existing home owners are feeling increasingly cautious about taking on any additional debt at such an uncertain time and many first time buyers are holding off, waiting for more appealing fixed rate deals before committing to their first mortgage.”