The housing market's biggest problem
Robert Powell looks at the key factors that are holding back a housing market recovery...
It’s rare to switch on a TV or radio nowadays without tuning into talk of some sort of crisis. And the economic uncertainty these crises are instilling in the British economy is taking its toll on the UK housing market.
Almost 90% of respondents to a Royal Institution of Chartered Surveyors (RICS) poll cited uncertainty about the economy as the key factor holding back the property market. After this, 70% of the surveyors questioned said availability of mortgage finance was restraining recovery in the sector, while 42% pointed to house price falls.
For Ben Thompson, Managing Director of Legal & General Mortgage Club, confidence is the key factor stopping the market returning to normality. “People aren’t confident that employment outlook is good. They’re worried about what’s going on in the Eurozone. House prices are also broadly flat and in some areas they are falling,” he said.
Affordability
But despite the factors currently weighing down the housing market, mortgage rates are actually remarkably reasonable.
Figures from the Council of Mortgage Lenders (CML) show that home loans are at their most affordable in eight years. Average monthly interest payments now typically make up 12.3% of income.
But while affordability is up, availability is still stagnant. In October, 44,500 home loans worth £6.5 billion were advanced, down from 48,200 (£7.1 billion worth) in September.
Jayne Walters from the CML said: “Unfortunately there are plenty of people who don’t meet the lenders' affordability criteria. And for those it’s proving quite difficult to get on the market”.
Stamp duty
Many expect transaction levels to pick up in the first few months of 2012 as the Government’s Stamp Duty holiday on properties worth up to £250,000 comes to an end in March.
However if history is to be believed this increased activity may not last. The last Stamp Duty holiday that ended in December 2009 produced a spike in transactions, followed by a slump. And according to the CML, this may well happen again.
More: 16 mortgages borrowers cannot afford to ignore | Get a best buy mortgage | Take a break from your repayment mortgage payments
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well that sure sums up the last government... it rewarded people who behaved badly (i.e. engaged in mortgage fraud) and punished those who behaved well. Wasn't there a proven mortgage fraudster who was rewarded by a highly salaried job in Brussels, which came with huge pension rights, and who, when that came to an end, was then given a sinecure in the House of Lords?
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Supasap Perhaps you do not read the comments of everyone on here, but to say that you have not seen an explanation for the rise in prices from mid 90's to 2007 is quite remarkable. Here's the answer (one which I've suggested here numerous times before by the way). There was a massive growth in the mortgage market and the availability of mortgage credit during that period, especially from 2000 onwards. This also coincided with an almost total lack of regulation of the market and the growth of self-certification and fast track loans which by 2007 were 47% of the mortgage market at a time when the amount of mortgages given by the banks was in the region of £350billion for that year. In other words, easy money fed the higher prices and if your salary didn't come up to scratch you could just make one up and the industry actually encouraged buyers to do this. Self-cert has now been banned, those priced out now need 25-40% deposits, when 4 years ago all they needed to do was add 10 grand+ to their salary figure on a mortgage, etc. As to why no big price fall, again the answer is easy but slightly complex. The Govt and BoE rescued our dodgy banks by "printing" money out of thin air, something Euro economies like Spain and Ireland could not. The US is different because even though they also printed, they also had massive over supply of property. In other words, if the UK banks that were in trouble had been allowed to go under which is what a free market would have inflicted on them, the UK housing market would have been bust because the UK economy would have been bust. Under the guise of saving the banks and therefore the economy, the UK was able to con people into believing that there would be no housing crash. What we have seen instead is a massive fall in sales. Prices have not fallen off a cliff, but equally while there is demand out there, hardly anyone can afford to buy at current price levels. New regulations banning self-cert only make this much harder for everyone who didn't lie and cheat prior to 2007, but that's the UK for you.
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Dogs in Atas Out it worked. It isn’t pretty, dots join. Plan point five or attack pronged three either have governments.
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01 January 2012