Archive for the ‘UK House Prices’ Category

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Outlook for property prices is bleak

July 17th, 2009

This was an assessment of UK property investment made by the IMF in its recent “health check” on the UK economy.

The IMF gave a warning that the UK has far too much debt, so much so that it is testing the market’s confidence in sterling.  Why is this is important for the UK?  Put simply if markets lose confidence the value of the UK currency will fall, driving up import prices and creating inflation.  The latter is of particular concern when the economy is weak.

The figures being quoted are almost mind blowing, the IMF are warning that UK debt could equal the GDP (Gross Domestic Product), which is around £1.5 trillion.  The bottom line message from the IMF is that the UK needs to tackle public spending, costs have to be reduced.

The IMF also warned of the risk of a Double Dip recession where following a short period of recovery in the UK economy we enter another period of recession.

Overall it is gloomy stuff from the IMF, but it does not mean this is where the UK economy is heading, its a bit like the doctor telling you to change your life-style habits to avoid future illness.  The key thing here is for the UK to take note and follow the doctors orders.

So lets end on a positive note.  It is hard to see that the UK government will not take the action needed to cut spending, so we can reasonably expect to the UK recover from recession and for the economy to start growing in a more sustainable way.  It will not be a return to the heady days of a few years ago, it will be a slower recovery over a pro-longed period, but a recovery it will be.

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Posted in UK Economy, UK House Prices

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Temporary increase in poperty prices?

July 17th, 2009

According to a survey of Estate Agents it is expected to see property prices increase slightly during the third quarter of 2009.  The reason for this projected increase has been given as a shortage of properties listed on the market with Estate Agents.  Mind you, a cynic might say it is in the interest of Estate Agents to say this, simply to get more business, but then they might have a point.

The spring and summer periods are traditionally the most active time for buying and selling property.   But, as we are in the midst of a recession with depressed house prices many will be holding off from putting their property on the market, thus creating less choice for those looking to buy.  In effect this creates a temporary supply-demand imbalance thus giving a slight lift to sales prices. 

The research did not say how this all breaks down across the country, but with unemployment ballooning in some parts of the country, such as West Midlands which is already over 10%, then it is unlikely we will see these temporary rises across the board.

So why only temporary property price increases?  This is because the current increase in demand will fall as the seasonal buying period comes to an end in the autumn.  For long term sustainability of house prices we also need the banks to lend “normally”, e.g. not to ask for unrealistically high deposits or 100% perfect credit ratings.

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Posted in UK House Prices

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Future house prices

July 15th, 2009

Today two very respected organisations published reports on the prospects for UK house prices.

Firstly RICS, the Royal Institute for Chartered Surveyors.  For those who do not know, when you get a mortgage on a property it needs to have a valuation by a surveyor who is a member of RICS, thus they have much knowledge on UK property prices.  RICS identified that the modest increases recently experienced have been primarily due to the lack of housing supply on the market, thus creating a shortage for the relatively few buying.  The bottom line form RICS was that they do not see a prospect of a sustained upturn in property prices until the availability of mortgages improves.

Then there was PwC, Price Waterhouse Coopers, a much respected consultancy company.  The PwC assessment of the UK property market was that they expected to see further falls in property prices in 2009 and 2010.  PwC also indicated that by 2020, even with subsequent growth in property prices, they may not reach 2008 levels, thus it could be well over 10 years for house prices to recover to their former peak.

The house4sale view is that PwC are being a little over-pessimistic, the detail of their analysis is not known, but whilst economic growth is challenging the UK population is growing at the rate of 1% p.a., this in itself would have an upward effect on house prices due to the current lack of supply.

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Posted in UK House Prices

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House prices fall again

July 14th, 2009

We blogged earlier the report from Nationwide that they recorded a 0.9% increase in house prices for June (you can read the post here http://www.repaymortgage.co.uk/blog/2009/07/03/house-prices-rise-again-in-june/ ).  But the Halifax have now published their data stating a FALL of 0.5% in June 2009.

Clearly there is a discrepancy in figures, but it is the trend that is key here.  Even though the Nationwide reported an increase, it was at a lower rate than May 2009.  So taking account that we are in the midst of the peak time of the year for house buying we could well see further falls in prices as the buying season slows down toward the last quarter of the year. 

As a property buyer then maybe you should be negotiating a discount on asking price reflecting the weak market.  As a property seller, unless you really do need to sell,  maybe you should take your property off the market until such time a it recovers – at the very least it will save you the cost of HIP fees.  If you really need to sell fast then you could also consider a cash property buyer, this way you can avoid HIP costs (as your property is off market) although you will get a lower price for the fast sale.

Overall its still a tough market for house sellers, hopefully the market will start to recover in spring 2010.

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Posted in Fast House Sales, Property Buyers, UK House Prices

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Barrat house prices fall 19%

July 10th, 2009

Today one of the UK’s largest house builders announced that house “selling prices” fell by 19% in the last 12 months.  Barrat also said that the number of new build properties it completed fell by more than 5,000 to 13,202, that is a fall in new build homes of more than 27%.

Looking across the UK analysts indicated that the West Midlands has been most affected by the recession.  Barrat also indicated that the market for flats was poorer the houses and will switch some of its future building programme from flats to larger homes. 

Barrat like many house builders has suffered hugely in the recession with overall debts ballooning following its purchase of a rival for £2.2 billion in 2007 (not good timing with hindsight).  Going forward Barrat is reducing expenditure through less land purchases.  This is slightly worrying, the combination of less land purchased and building of larger homes suggests a significant reduction in the number of homes built by Barret in the coming years.  With the continued population growth forecasted, if other builders adopt a similar strategy, we could face a shortage of homes in years to come.

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Posted in UK House Prices

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Queen hit by house price falls

July 10th, 2009

The falls in the value of property has hit everyone, not even the Queen was immune (or was it “not amused”?).    The value of Crown Estates, which runs the Queens property portfolio, fell from £7.3 billion to £6 billion in the 12 months to March 2009.  This represents a staggering 18% fall in value in just 12 months.

The Crown Estates portfolio includes over 1000 properties, many of which are listed buildings, so not your normal family homes.  On the positive side for the Queen, despite the fall in property values Crown Estates actually increased its overall profit by around 6% to £226 million – the increase was understood to come from non-property revenue sources.

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Posted in UK House Prices

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House buying costs increase

July 8th, 2009

The UK Land Registry has announced a 500% increase in the cost of updating the land register with new owner details.  It used to cost £10 for the cheapest properties, now it will cost from £50 for the cheapest property to £920 for the most expensive properties. 

How does this affect us?  Whenever anyone buys or sells a house or piece of land the ‘land register’ is updated with the new details.  Also when a new mortgage or secured loan is taken against a property the ‘land register’ details are updated to record this.  Every update to the land register incurs a charge.

Land Registry justification for the increase is that  they have not increased costs since 1993, a reasonable argument, but why increase costs whilst we are all in the midst of a recession and a housing market slump? They also state that their “income” from fees has fallen heavily due to the lower number of property sales which are currently 44% of the levels they were 2 years ago.  Does this mean that when property transaction increase and they start making huge profits they will consider cutting their fees?  I doubt it.

Whatever the Land Registry’s justification it does not seem very good timing to increase the cost of buying a home, but as they are a monopoly it seems then they can charge what they like, we have no choice but to pay up.

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Posted in UK Economy, UK House Prices

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BCC – Recession is not over yet

July 7th, 2009

The British Chamber of Commerce (BCC) reported that it is “far too early” to forecast the end of the recession in the UK.  In particular BCC noted that unemployment was expected to reach around 3.2 million  by mid 2010.  Perhaps more worryingly the BCC commented that without more measures to minimise effects of the  recession  the UK economy could “drop off” … I guess by this they mean enter into a depression (a prolonged and deep recession).

The BCC is a highly respected group, and its report is based on a survey of 5,000 businesses in the 3 months to June 2009, thus it is certainly a report that should not be ignored.

So what should the Government do to alleviate the concerns about the UK economy?  There is no magic bullet here, but key is building business and consumer confidence, financial liquidity, and perhaps reducing the burden on businesses to help with employment – such as cancelling the NI tax increase scheduled for 2011.

As reported in other posts on house4sale, such feedback from business experts suggests that we are far from the point of recovery in house prices.  Since starting this blog a month ago, and taking account of all of the reports studied, it would seem that we are at least 12 months away before we see any sustainable recovery in property prices.

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Posted in UK Economy, UK House Prices

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House prices rise again in June?

July 3rd, 2009

The Nationwide monthly update on house prices recorded a 0.9% rise in June, lower than their 1.2% figure for May, but it is still an increase for the third month in a row.

Should we (home owners)  get excited?  Well in short, not yet, but this is good news.  Some analysts are saying that the lack of properties for sale was creating the effect of increasing prices, the actual number of buyers is still well below normal levels for this time of the year.

From my perspective buying demand for houses is based on three factors:

1. Affordability – the property must be affordable, at the starter home end of the market it is a simple comparison largely based on the cost to rent versus the cost to buy.  If it is cheaper to buy than rent then there will be high demand from buyers.

2. Finance – there needs to be readily available mortgage finance so that buyers can buy.  Its not a question of whether you can afford the mortgage finance, currently it is often a case of whether you meet the lender’s criteria for a mortgage.

3. Confidence – as buyers we have to feel confident about house prices, it is a major purchase and we thus need to feel confident that prices are not going to drop off the cliff in a year or two from now.

So where are we on these 3 key factors?  Well, based on what I am reading from the many reports published:

Affordability – in many parts of the country it is still cheaper to rent than buy when you consider future expected mortgage rates (e.g. 5.5% to 6.5%) and the various ownership costs from insurance through to maintenance.

Finance – this is starting to improve, but we still have some way to go for first time buyers as the LTV (Loan to Valuation) often requires a very large deposit.  Credit ratings is still quite an issue for many would-be borrowers.

Confidence – this is starting to return with each positive report on house price increases, but for many there is still the uncertainty over increasing unemployment.

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Posted in Mortgages, UK House Prices

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Mayfair property & Monopoly

July 2nd, 2009

A report published in several leading newspapers today highlighted how the credit crunch has affected property prices in one of London’s most exclusive areas, Mayfair.

Many of us will know of the game Monopoly and be familiar with the huge rents you paid when “landing on Mayfair”, often enough to wipe you out of the game.  Well maybe things are about to change.

Mayfair had become the home of hedge fund managers, with their companies often making vast profits and paying out huge salaries, they could afford to pay high rents, and probably even helped to increase rents from their demand for prestigious properties. 

Now times have changed, some companies have closed, others relocating, and many fund managers no longer make the huge salaries and bonuses that had become the norm in recent years.  The upshot is rental demand has fallen, and of course this has fed into a huge drop in rents and property prices.  Mind you, for most of us Mayfair is still hugely expensive, but maybe it will get “relegated” in the game of Monopoly.

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Posted in UK House Prices

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