Archive for June, 2009

UK economic outlook

June 30th, 2009

The UK Government Office of National Statistics (ONS) has reported the UK’s fastest rate of economic decline in over 50 years of reporting.  The statistics show the UK economy shrank by 2.4% in the first 3 months of 2009.  Perhaps more worryingly was the comment that these were far worse than expected by ONS who had previously forecasted a 1.9% decline.

Many are now starting to talk about a “double dip” recession, e.g. we will start to come out of recession later in 2009, then we will sink back into recession in 2010.  The double dip theory is based on the potential impact of high unemployment which is expected to reach over 3 million in 2010. 

No one seems yet to have reported on the regional effects of the projected 3 million unemployment in 2010, clearly there will be some parts of the UK worse hit than others, and no doubt it will be these areas that see the greatest negative impact on property prices.

For details of statistics published by the ONS please visit … http://www.statistics.gov.uk/hub/index.html

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Posted in UK Economy, UK House Prices

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Is there a shortage of houses?

June 29th, 2009

Tee Government published statistics at the end of 2008 identifying a population growth averaging 7% across the UK by the year 2017, which equates to roughly 4 million more people.  This is due to a combination of effects such as higher birth rates, longer life span and net migration into the UK.

So what does this mean of housing demand?

Well, if we assume 25 million houses / flats today, then this equates to another 1.75 million new homes by 2017, which is an average of around 220,000 new homes each year.

But, we have a short-medium term problem, the private sector new build has drastically reduced due to the credit crunch, so in 2 or 3 years we could start to see an acute shortage of homes. 

Today the Government also announced they would build 110,000 new affordable homes over the next 2 years, this equates to 55,000 homes per year and compares with a growing demand of 220,000 homes based on the Government statistics.  So we have to assume that the private sector needs to build 165,000 new homes each year to keep up with demand.

Lets hope the property market recovers soon and builders start to produce the new homes required!

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Posted in UK Economy, UK House Prices

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The truth about house prices

June 29th, 2009

There have been so many different organisations publishing data on UK house prices I though it would be good to capture a snapshot of what everyone is saying and then see what can be collectively concluded from the various reports.  So here is a summary of headlines published in June 2009:

Housetrack – Reported that prices held steady in June, only 3% of postcodes saw prices fall.

Standard & Poor – Reported that house prices could continue falling into the forth quarter 2009.

Council of Mortgage Lenders (CML) – Reported a 2% fall in lending for May 2009, but commented that this is partly due to a fall in the number of remortgages.

Nationwide – reported a 1.2% rise in house prices for May 2009.

Halifax – reported a 2.6% rise in house prices for May 2009.

Rightmove – reported a 0.4% fall in house asking prices for May 2009.

Land Registry – reported a 0.2% fall in house prices for May 2009. The Land Registry also state on their website that they provide “the most accurate independent house price index available”.

So, what can we conclude form all of this?  Firstly there are widely conflicting reports on what is happening with house prices, there a several reasons for this.  One is timing, e.g. are price changes recorded on purchase completion (Land Registry) or at some earlier point in the purchase process from advertiser asking price through to mortgage offered.  Another factor is data volatility, as there are lower volumes of transactions then data from some sources may be more prone to error. 

But perhaps the most interesting point is that we have moved from a point 6 months ago when everyone was reporting falls to today where we have mixed reports.  This could well suggest we are getting close to the bottom of the market,  although before getting too excited, beware of a possible ”second dip” in prices as we have yet to see the full effect of unemployment which is not expected until 2010.

Overall conclusion – we are getting near to the bottom of the market, when all of the data sources say prices are steady or increasing, we will be on the way up again … until the next  change in the property cycle, but hopefully not for a few years!  So if you need to sell your house fast then may be the market will soon turn in your favour.

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Posted in UK Economy, UK House Prices

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Did house prices fall or rise in May?

June 26th, 2009

The NationWide reported an overall price rise of 1.2% in May 2009, BUT the Land Registry (which records all UK house sales) recorded a fall of 0.2% in average property prices.  So who is right?

On the face of it I would go with Land Registry, simply because they are based on a higher volume of transactions, that said, depending on how intelligently Nationwide puts its stats together, then they could be more accurate.  For example a bank/building society could make more like-for-like comparisons to see changes in similar property types, whereas Land Registry relies on transactions in a given postcode area.  But if you were a sceptic you might say that the bank want to talk up prices to get us buying and taking out their mortgages?

The most surprising thing for me from the Land Registry May 2009 house price data is how it varies by area.  For example Wales recorded an average increase of 1.2%, whereas London recorded a fall of 1.5% and Yorkshire & Humberside a 2.3% fall; worse still the North East recorded a 4.3% fall in May, lets hope that was just a statistical error!

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Posted in UK House Prices

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Rent to Own / Buy?

June 26th, 2009

So what is this about?  Well its an amazing concept to buy your first property, put simply you start out renting the property as the tenant, then at a later date you exercise your right to buy the property.  This has been going on in Australia and USA for some time and a whole industry has grown up based on this concept of “rent to own” or “rent to buy”.

The hardest part is finding a property available to purchase in this way.  Ideally you need a vendor who does not need to take their equity out of their house right away, but equally they need to move quickly and don’t want to leave their property empty waiting to find a buyer.  In other words, someone who wants to sell their house fast but are willing to wait for the equity. 

The advantages to the tenant-buyer are clear, but there are also advantages for the vendor.  For example the vendor can agree a price to sell in advance, they get a large rental deposit from the tenant, and they get a tenant who is going to look after the property as if it were their own – because in 2 years or so it will be their own property!  If you want to know more about how this works try http://www.simple2buy.co.uk/forum/ where you will find some experts on this new (to UK) concept of Rent to Own / Buy.  Update 20 July 2009 – you can now advertise for free the type of property you are looking to Rent then buy.

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Posted in Rent to Own / Buy

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Find out what your house is worth today

June 25th, 2009

I came across this useful house price calculator tool that some may find helpful … http://www.nationwide.co.uk/hpi/calculator.asp

As the starting point you need to know when your property was last valued and what that figure was … for example you can use your purchase price as the approximate valuation, or maybe when you last re-mortgaged.  The calculator will then give you an indication as to the value of your property in the most recent year-quarter.

However be aware, the figures are based on UK averages, your property may not follow the UK average (see the earlier post on property prices).  Another factor to consider is any improvements you have made to the property. 

Overall though the calculator is a useful tool based on historical changes to the average UK prices, if only we had a calculator that could look into the future!

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Posted in UK House Prices

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Bank of England Governor 1, Chancellor 0

June 25th, 2009

After Mervyn King’s comments yesterday there must have been some disgruntled people in the Treasury, and in particular the Chancellor, Alistair Darling.  So what is this all about?

Well firstly Mervyn King raised alarm at the size of UK budget deficit and commented that this needs to be addressed within the term of the next parliament – effectively stating that there needs t0 be spending cuts.  and this is clearly at odds with the Chancellor after the statement in the previous week where Gordon Brown stated that the Tories want to cut spending whilst Labour want to continue investing.  So, who is right, Mervyn King or the Chancellor, well the experts seem to be siding with Mervyn King.  It will be interesting to see what is in the next budget.

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Posted in UK Economy

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Where are we now with house prices?

June 25th, 2009

This is a tough one to answer.  Looking back the decline in UK residential property prices started around the end of 2007.  There has been much data published on prices falling month by month, although since March 2009 some have been suggesting price increases (Halifax reported an increase of 2.6% in May 2009), but for many of us it doesn’t feel like prices are increasing.

According to an article published in Telegraph.co.uk most towns and cities across the UK have fallen by over 20% from their peak in late 2007.   Some areas have seen dramatic falls in prices (figures based on February 2009)…

Blackpool: -28.2%

Kilmarnock: -26.5%

Hertford: -26.5%

Bridgend: -22.5%

Exmouth: -21.4%

Windsor: -21.1%

London: -21.4% (data from another source)

A useful source of data on house price changes in 12 months to April 2009 can be found on the UK Government Communities websites ..link http://www.communities.gov.uk/documents/statistics/pdf/1247222.pdf   The regional index highlights a fall of 15% in London and 14.8% in the South East.  But the largest falls by far have been in Northern Ireland where prices have fallen around 23% in the 12 months to April 2009.

Probably the key question for many is what about future house prices?  Well, there are many opinions on this, much will depend on the impact of unemployment, but from reading the many analyst reports our interpretation is we may have another 10% fall in average prices – but clearly this will vary by town / city.

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Posted in UK House Prices

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Getting a mortgage

June 24th, 2009

Doing some research today on mortgages.  Overall there are some signs of improvement however the common theme amongst most lenders is that the lowest interest rates were for mortgages with low LTVs (loan to valuation).  For example the Woolwich at time of writing was offering a mortgage at just 3.24% but the LTV was 60%, in other words you need to find a 40% deposit to buy your house. 

Of course this is not of much help if your equity in a property has fallen to say 20% or so and you want to re-mortgage, in fact in the current market for many this is not an option.  Worse still for those in arrears who are either trying to re-mortgage (today its almost impossible) or taking a desperate action for a quick house sale rather than wait for repossession.

Overall it appears that with the shortage of credit the banks are building loan books (mortgages to the likes of you and me) with very low risk ratings, e.g. with a 60% LTV it is very very unlikely the bank will ever lose money should the property get repossessed.  This helps the banks improve their own risk ratings, and in the longer term it will help them improve overall availability of mortgages and place these within the reach of first time buyers.  Time will tell.

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Posted in Mortgages

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UK Property Market Outlook

June 24th, 2009

Today is 24th June, it has been over 12 months since the credit crunch hit the UK and in particular the property market. In 2009 it is expected a total of 65,000 homes will be repossessed (down from a previous forecast of 75,000), hopefully the numbers will be less. But key for everyone is when the recession will end, most analysts say later in 2010 . We will keep you updated here on progress and what the experts are saying.

The OECD is relatively positive about western economies coming out of recession in 2009, however reading the small print it seems UK and Europe will recover later than USA, and in particular the OECD also suggest a slower recovery for UK, in fact they suggest zero growth in 2010 .  At least we can see the light at the end of the tunnel, as zero growth next years compares with the predicted contraction of over 4% in 2009.  Based on this data it is certainly too early to be talking about “green shoots” in the UK housing market as unemployment has not yet reached its peak (expected in 2010) and banks are still reluctant to lend.

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Posted in UK Economy

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