Archive for the ‘UK House Prices’ Category

« Older Entries
Newer Entries »

House Price Forecasts

August 11th, 2009

It is becoming a topic of almost constant debate; Are we at the bottom of the market? Are prices now increasing? Will prices fall back again?

Yesterday a report was published by RICS, the Royal Institute of Chartered Surveyors. The report was generally positive but caution was noted. The view was that an increased number of RICS surveyors did see prices increasing, but, and there is a but, this was seen largely due to the shortage of property for sale. In effect the current price rises reported are to be taken with caution as this is not a normal market with both buyer and seller behaviour affected by the ongoing economic difficulties.

The Bank of England has also warned that the recession is not yet over, and that recovery could be protracted with slower growth over a number of years. Such comments do not indicate a boom in property prices any time soon.

At the end of July 2009 we also commented in our blog that caution needs to be exercised with regard to increasing property prices ( you can read our previous post on house prices here ).  The reports now coming from RICS support our previously published views, essentially we could see property prices ease back during the winter of 2009 / 2010, with a recovery later in 2010.

Our views are based on a number of factors:

  1. Unemployment will continue to rise in the first half of 2010, this will have a negative effect on property prices.
  2. Mortgage finance availability will continue to be challenging for much of 2009, this will have a negative impact on property prices.
  3. The shortage of properties for sale will have a positive impact on property prices in 2009, during the winter of 2009 / 2010 there will be less buyers (seasonal effect) and thus the positive impact on property prices will reduce.
  4. Population growth will create an increased demand producing a positive impact on property prices from 2011.

Of the 4 factors above the most uncertain is mortgage finance availability.  As soon as banks start to lend “normally” it will stabilise property prices, at least stop them from falling.  Overall the combination of these factors would suggest a recovery in property prices from the second half of 2010 with a sustained recovery in subsequent years.

Comments Off

Posted in UK House Prices

Tags:

Not enough homes being built

August 3rd, 2009

The credit crunch has had a huge impact on building of new homes, recent reports suggest only 100,000 homes will be completed in 2009. Worse still is the lead time to build homes, this includes land acquisition, planning permission, and construction, from start to finish this can take several years. The result is that when the economy does recover and house building ramps up, it will be some time, possibly 2 to 3 years before sufficient numbers of new build homes are completed.

Some people may say that this is not such an issue as we already have spare housing capacity, this is true today, but the fact is the UK population is growing every year.

Recently published figures by the UK Government forecast a population growth of around 1% per year over the next decade. And 1% of UK population is around 600,000 people each year, assuming an average of 3 people per home that requires 200,000 new homes each year, double the number currently being completed.

But the future shortage of homes could be much worse, for example much of the new housing completed in recent years has been flats. This has created an imbalance suggesting whilst there will be an increased demand for all housing it could see a more acute shortage of houses.

So when will we start to see the effects of the housing shortage? The best guess is shortly after the economy recovers, so probably from 2011. The effect could see a higher rate of inflation in houses (compared with flats) from 2011 onward.

Comments Off

Posted in UK House Prices

Tags:

Are house prices now on their way up?

July 30th, 2009

There has been some good news reported recently regarding data on increasing house prices.  Firstly Land Registry recorded an increase in June of 0.1% (England and Wales average), only a small increase but this is very positive news considering the previous months where Land Registry recorded decreases.

This was followed by a report from RightMove that property asking prices were increasing, and notably in London where they recorded an increase of over 1% in the average asking prices, however there were also reports that the increases were due to lack of properties for sale to satisfy the modest level of buyer demand.

We decided to carry out a small survey ourselves, to hear first hand what estate agents think about current house prices, our survey was small (6 companies in North London) but we had a 100% consensus.  Every estate agent we spoke to said the same thing, there is a shortage of properties on the market which is pushing up asking prices or at least the vendors reluctant to drop.  The estate agents were also reporting a lower level of completions, so for them the property market still has a long way to go.

It was an interesting survey, only a small sample but it did support the general view on house prices at the moment – asking prices generally going up.  But, there is a clear underlying view that we that picked up, asking prices are only increasing due to lack of properties for sale, this is not a normal buying and selling market so caution still applies.

This last point is picked up when we look at mortgage lending.  Banks are still not providing sufficient mortgages to meet buyer demand.  Skiption Building Society’s recent report captures this, mortgage lending for the first 6 months of 2009 totalled £218 million, for the first 6 months of 2008 they provided £922 million in mortgages.  That is a massive reduction of over 75% in mortgages provided.  Skipton commented that raising funds for mortgages was challenging in the current market and this had affected their ability to lend.

So to sum all of this up….

There is now sufficient evidence to show that house prices are increasing.  But they key underlying factor seems to be a lower level of sales.  As long as would-be sellers do not rush to put their properties on the market we will maintain the supply-demand balance for house price stability.  Equally if lenders start to increase the number of mortgages provided this will underpin the market and potentially help prices to start increasing again.  Our view is that house prices will ease back again during the winter months, but we expect to see increases in  average house prices during 2010.

1 Comment »

Posted in UK House Prices

Tags:

Lenders unable to value properties

July 20th, 2009

It was reported in the Guardian today that lenders are delaying / stopping new mortgages because of difficulties with valuing a property.  The consequence reported was that whole property chains are failing to complete due to one or two in the chain struggling to get the required valuation.

So why does this happen?  Well you will see from our earlier posts on house prices that there is much confusion as to what is happening in the market.  Halifax, Nationwide and Land Registry all offering different figures, some up, some down.  The bottom line is the low volume of property transactions combined without continued recession uncertainty make it difficult for valuers.

That said, if your property is of fairly standard build, typical for its area, then it should not be difficult to arrive at a property valuation, here are some tips.

1 – Check out the actual sold prices in your street.  These are the prices paid for a property, not what was advertised by the estate agent.  You can find out what the sold prices are here … http://www.hometrack.co.uk/ … Simply type in your postcode, you will then get a list of sold prices and dates for your street. 

2 – Next look at the list of properties sold and note the prices of any properties that are similar to yours (known to valuers as comparables). 

3 – Next find out what the postcode price change is for your area. Enter the sold price for the comparable you found (in step 2 above) here  http://www.nationwide.co.uk/hpi/calculator.asp … along with the current quarter / year.  Then enter the current quarter / year and “calculate”4 – You have the current valuation for your comparable.  But you need to do one last check, make any allowance for differences between your property and the comparable, e.g. conservatory added, general condition, etc. 

The 4 steps above will give you an approximate valuation for your property, it is not a RICS valuation but if you have a good comparable in your street then your valuation should be close to the RICS figure.

Comments Off

Posted in UK House Prices

Tags:

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.

Comments Off

Posted in UK Economy, UK House Prices

Tags:

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.

Comments Off

Posted in UK House Prices

Tags:

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.

Comments Off

Posted in UK House Prices

Tags:

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.

Comments Off

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

Tags:

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.

Comments Off

Posted in UK House Prices

Tags:

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.

Comments Off

Posted in UK House Prices

Tags: