© 2025 News On The Block. All rights reserved.
News on the Block is a trading name of Premier Property Media Ltd.
© 2025 News On The Block. All rights reserved.
News on the Block is a trading name of Premier Property Media Ltd.
With all of the major house price indices reporting falling capital values, some encouragement came from the FT House Price Index that showed that London property prices are faring better than those elsewhere in the country.
The index, which tracks completed sales rather than agreed mortgages, highlighted house prices across the UK dropped by 0.3% in July, but that the fall would have been double if the London data was removed. The report showed that London property prices were holding and in some areas rising in value. Property prices in the Borough of Kensington and Chelsea showed the largest gain in the three months to July and during the same period prices throughout the capital registered a rise of 4.6%.
Speculation has continued to rise that the government may suspend stamp duty or allow homebuyers to defer its payment to a later date. Similar tactics were used by the Conservatives to try and restart the housing market in the 1991 recession when they temporarily suspended the tax on homes worth less than £250,000.
Alistair Darling has not ruled out any changes to stamp duty saying that he was “looking at a number of measures” to help people during the economic downturn. However, many commentators have criticised the government for not being decisive enough on the issue, arguing that speculation about stamp duty suspension is putting off buyers from committing to purchasing property.
The Bank of England voted for the base rate to be kept at 5% in August meaning that interest rates have remained stable for the past four months, following a 0.25% cut in April 2008. Whilst many people in the property industry have called for more to be done to reduce interest rates to help kick start the housing market, the Monetary Policy Committee has been reluctant to respond as it continues to battle inflationary pressures.
However, there was some good news from the Bank of England for homeowners as it reported that the cost of two-year fixed-rate mortgages was beginning to fall. Its latest figures show that the average rate charged by lenders on a new two-year deal, for a buyer with a 25% deposit, was 6.36%, down from an eight-year high of 6.6% in June. It is the first time since February that the average costs of these mortgages has fallen and follows small rate cuts from all of the big lenders.
Research from the Association of Residential Lettings Agents (ARLA) shows that the UK’s Private Rented Sector is worth over £500 billion and now outstrips the value of all privately owned commercial property including offices, shops, hotels, factories, warehouses and leisure facilities.
The report by Professor Michael Ball, Professor of Urban and Property Economics at Reading University, forms part of a wider study into residential housing commissioned by the National Federation of Property Professionals, which will be published later in the year. The report forecasts that rents will rise by 10% to 15% in both 2008 and 2009. Despite this, Professor Ball argues that the modern private rented sector is helping to stabilise housing because it accommodates those who, by this stage in the housing cycle, would be over-stretched borrowers with rising negative equity.
Whilst many of the UK’s big banks are suffering from the current downturn in the housing market, Abbey has used the more challenging conditions to increase its share of the mortgage market. Abbey overtook HBOS as the UK’s biggest lender of new mortgages, supplying 26% of all home loans taken out in the first half of 2008. As other lenders have withdrawn from the market, Abbey has taken the opportunity to take higher-margin, low loan-to-value business and has also focused on retaining its existing customers.
Abbey’s total mortgage market share is now 12.9%, however, Halifax remains the biggest overall lender, with a 20% share of the total UK mortgage market.
The residential property industry is one of the most entrepreneurial sectors in the UK and therefore it is not surprising that it has found new and clever ways of selling its properties. Leading regeneration specialist, Berkeley Group, has looked for new markets to sell its flats to and is the first UK developer to actively promote its schemes to the aspirational Indian upper middle classes. Jones Lang LaSalle estimates that Indians will buy between 20,000 and 30,000 UK residential properties over the next decade. The Berkeley Group is at the forefront of capitalising on this trend and is actively promoting developments in Vauxhall and Stanmore through a series of exhibitions in Bombay and Delhi.
Whilst the UK residential sector struggles through the current market, super-prime properties in leading global locations remain unaffected. Lily Safra has recently sold her villa on the Cote D’Azur to a mysterious Russian billionaire for €500 million (£392 million) following a long process which involved her holding out for months until the buyer met her demands. It just goes to show that in some locations it’s still a sellers market.