Homes in Wales overvalued by up to 30% say experts and a ‘correction’ could be on the way
Homes in Wales are overvalued by up to 30% on average, property experts have said as prices rose at their fastest ever level over the last year.
Prices have surged in Wales faster than any other part of the UK during the pandemic due to a so-called ‘race for space’ and the normalisation of home working.
But S&P Global Ratings have said that houses in Wales, as across the rest of the UK, are now overvalued and that there could be a price correction.
House prices in London were overvalued at up to 50%, they said, and had already fallen on last month. Meanwhile, houses in Wales were overvalued at between 25-30%.
Alastair Bigley, a researcher for the agency, warned that prices were likely to fall.
“A combination of low rates, the stamp duty holiday and excess savings amid the pandemic have driven property prices higher, particularly in London and the South East where overvaluation relative to income over the long-term is as much as 50pc,” he said.
“We expect a greater correction in property prices in an overvalued market.”
In Wales last year, full-time employees could typically expect spend around 6.4 times their earnings on purchasing a home, up from 5.8 times their wage in 2020.
Rightmove said that house prices in Wales were up 3.3% on last month and 14.4% on a year ago to an average of £246,104. A 25% correction would bring average prices down to £184,000.
The forecast comes as campaigners in Wales have been calling for action to ease house price rises, with a rally held in Aberystwyth last month attended by 1,200 people.
Cymdeithas yr Iaith who organised the protest said that they recognize that the plans set out by the Welsh Government some of their concerns, but also called for a Property Act that would provide a home for everyone and strengthen communities and the Welsh language in all parts of the country.
“Following pressure from people from all over Wales, the Government launched two consultations, one on creating a new use class and the other on the Government’s Welsh Language Communities Housing Plan,” Mabli Siriol Jones, Chair of Cymdeithas yr Iaith, said at the rally.
“Pressure has had an effect, and today’s intention is to keep the pressure. We need an effective Property Act that will take the housing and planning system out of the free market and put it under the democratic control of our communities.
“We held the rally today, on the 60th anniversary of the broadcast of Tynged yr Iaith, a lecture which inspired the founding of Cymdeithas yr Iaith later that year. We have won several campaigns since then, thanks to the work of ordinary people, and we are confident that we will win this fight as well. ”
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“Correction” may also be aided by well-off people fleeing England (London) in case they get stuff they own seized, thus house prices could begin to dip?
I would welcome a devaluation of my house if it put me in a lower council tax band. I do feel however that any devaluation in property prices should be accompanied simultaneously with effective policies to limit second home ownership.
Sadly, it doesn’t work like that. Council Tax bands were set at a point in time and changing house values do not change the band your home is in.
The problem then becomes what is the UK economy if it does not have the Ponzi scheme of the property market to provide endless growth?
We have no productivity, the English frittered away all our resources, natural and otherwise, and whatever is left gets doled out to Tory party donors.
Much of what you describe as a Ponzi scheme has its roots in the UK ‘s lazy decision by politicians and business leaders to let so much of our manufacturing industry drift away in large chunks to China and other “cheap labour countries. Except it ain’t cheap, it comes at a cost. This was intensified by the crash of 2008-10 which led to the austerity project where public spending was slashed except where there were pet projects being promoted. At the same time UK Gov embarked on its Q.E scam, in tandem with many other so called leading economies and… Read more »
Negative equity for many of those Welsh people who have managed to buy. Let’s not wish this on ourselves.