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Predicting property prices in 2010

February 26th, 2010

Nationwide have just announced a 1% fall in property prices for February 2010, this is after a period of over 9 months with reported increases, so what is happening, what is the prospect for property prices in 2010?

We have previously blogged about the weakness of the property market and that we are not in a normal market where any increases or decreases can be taken as predictors for future prices.  The fact is the volume of property sales is well below historical averages, this lends itself to more unpredictable property prices.

Other factors also come into play, in particular the restoration of stamp duty thresholds on 1st January 2010.  Such changes in an already thin market have a more pronounced effect on property prices.

But key for most of us will be future property prices.  Unfortunately it is tough to predict, as we highlighted in our blog post about property prices in October last year.  The key factor for 2010 will be the election, who gets in power and what actions will they take to address the UK’s economic issues.  Whilst we are not in the same precarious situation as Greece we do have challenges to face, and how we face them will impact property prices.

So, back to the heading of this post, predicting property prices in 2010.  The fact is this year will probably be one of the most difficult to predict, because we have so many unknowns with the pending election.  Our best guess is that prices will be relatively flat in 2010, some months of increase, some of decrease.  Time will tell!

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Posted in UK House Prices

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Property prices rise 1.2% in October – according to Halifax

November 4th, 2009

The latest figures form Halifax report a fourth consecutive monthly increase in property prices of 1.2% in October, this compares with a 0.4%increase for October reported by Nationwide.

But it is the comments behind these headlines that are interesting….

Halifax’s housing economist, Mark Ellis, also raised caution that much of the recent increases are because there are too few homes on the market to meet demand.   Mr Ellis also commented that there are some indications that more people were deciding to put their homes on the market which would curb the rate at which property prices are increasing.

The Chief Economist of HIS Global, Howard Archer, commented that you can’t place too much store on one survey and that you need to look at the whole picture.  In particular Mr Archer commented that “I just don’t think the economy is strong enough to sustain these increases”.

Overall the message here seems to be that caution should be applied to the reported increases in property prices and that we are still in a fragile economy.

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Posted in UK House Prices

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Property prices, are economists coming to a consensus?

October 8th, 2009

After recent months of positive media reports suggesting that property prices are now on the rise and that the worst was behind us we are now seeing an increasing number of economists and industry experts painting a more pragmatic picture, one of uncertain times ahead, much the same as we have previously suggested in our blog.

Firstly the Chief Economist of Halifax, Martin Ellis, suggests that the recent increases in house prices have been largely due to an “increased demand with low level of properties available for sale” and “improvement in affordability”.

Carter Jones property consultancy, David Smith, said that “we have to expect more turbulence ahead, especially given rising unemployment and the fact that, at some point, interest rates will have to rise”.  Has he been reading our blog?

CBRE, Jennet Siebrits – head of residential research, commented that “the number of sellers has started to rise” and that this could re-dress the balance of demand-supply as the sellers start to outnumber the buyers, thus “leading to further house price falls”.

Overall there seems to be an increasing consensus, much as we have already reported, we are not yet into a period of sustainable growth in property prices.

Here is one of our posts from August outlining prosects for UK property prices ..http://www.repaymortgage.co.uk/blog/2009/08/16/uk-house-price-predictions/

You can browse more of our posts on property prices here … http://www.repaymortgage.co.uk/blog/category/ukhouseprices/

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Posted in UK House Prices

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Austerity and Property Prices

October 7th, 2009

This week we have heard the phrase “age of austerity” by George Osbourne at the Conservative Party Conference; in effect referring to a period of greater financial prudence as the UK reduces its budget deficit. So what will this mean for property prices?

Already announcements have been made to prune £7bn off the mountain of debt, but clearly there is much more to come. 

As yet no one has said that there will be job cuts in the public sector, but it seems impossible to achieve the savings required without job cuts.  Clearly higher unemployment is going to affect property prices.

Another subject not yet receiving much attention is tax increases.  The level of savings needed to reduce public debt are likely to require substantial increases in tax revenues, leaving us all with less money to spend.  Clearly such action is again going to impact on property prices.

Over the next few months each of the main political parties will unveil more details on how the budget deficit will be addressed, as they do it will become clearer on how we are all going to be affected, and in particular for this blog, how it will impact property prices.  

Visit our blog again later for further updates on the impact on UK property prices.

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Posted in UK Economy

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Property price increases reported by Nationwide

October 2nd, 2009

Nationwide have just reported a 0.9% increase in property prices for September 2009, the fifth month in a row that increases in property prices have been reported. Is it time for property buyers to move in?

Whilst it is comforting to many that the spiral of price falls seems to have abated and that maybe, just maybe, we are starting to see some upward movement there still needs to be caution applied by anyone looking to buy.

Firstly we have still to see further rises in unemployment, this will certainly have an effect on house prices, particularly in those areas that will be most affected by higher unemployment levels.

Secondly, we have some fairly significant budget cuts to feed through into the economy.  Whilst at the time of writing this blog there has not been any clear indication from the government on the severity of cuts, there seems to be almost a consensus amongst economists that significant cuts in spending will happen. The phasing and timing of these cuts will have an impact on property prices.

Thirdly, all of the data reported in 2009 on property price movements is based on an “abnormal market”, that is mortgage lending is over 50% down on the historical normal levels.  Until the market is more fluid we will not know the true effects of buyer and seller demand, and thus the impact on property prices. 

Overall there is no need for panic, but equally anyone who thinks prices are about to boom is very unlikely to realise this.  The facts are we are still in uncertain times, the property market has stabilised to some degree, but property prices are still vulnerable to many economic effects yet to unfold.

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Posted in Fast House Sales, UK House Prices

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Property sales still at historic low

September 30th, 2009

Yesterday reports were published on mortgage completions which fell very slightly from 52,404 in July 2009 to 52,317 in August 2009.  Commentators noted that this was the first monthly fall since November 2008, following which there had been steady monthly increases in mortgages completed. 

All well and good, but the facts are the number of completions are still at an historic low.  According to UK Government statistics there was an average of 136,000 completions per month during 2006 and 2007.  And since the late 1990s the normal level of completions has averaged over 100,000 per month. 

What this tells us is that we are still in a very abnormal property market, with mortgage completions at less than 50% of what is normal for this time of the year.  There are probably two main factors for this historically low level of mortgage completions:

1 – People do not want to buy right now.  Whilst this is difficult to determine without a large-scale survey, there may be some truth in this, whilst property prices may seem affordable to some, the worry of possible redundancy will clearly inhibit many from wanting to take on a new financial commitment.

2 – The banks simply are not lending to meet buyer demand.  There is plenty of anecdotal evidence of this, news articles are published almost daily about cases where applicants are denied mortgages.  With the high level of deposits required and increased “credit worthiness” requirements  it seems easier for the average person to run a marathon than it is to get a mortgage from a bank.

Whilst we could not find factual data to support our view it seems that the most significant factor preventing a recovery in the property market is the inability of banks to lend.

We found some other interesting data published by the Council of Mortgage Lenders (CML) which supports our views.  Each month the CML publishes figures on gross mortgage lending, in effect the total number of mortgages provided.  This is a better indicator to gauge banks performance in providing mortgages than the often published  “net lending”, as it is not distorted by the amount of debt repaid in any one month – gross lending = the total mortgages provided.

So what does the gross mortgage data tell us? Based on CML statistics gross mortgages advanced in the 2 years prior to the credit crunch were averaging £30 billion per month, but so far in 2009 mortgages are averaging just £11.8 billion per month. Perhaps even more surprisingly, for August 2009 gross mortgages totalled £12.6 billion compared with £19.9 billion in August 2008, that is over 36% down on the same month last year.

Overall there is some pretty compelling data that clearly shows the property market transactions and in particular bank lending is far below where it needs to be to support a healthy market … there are enough would-be property buyers, its just that they are finding is extraordinarily difficult to obtain a mortgage!

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Posted in UK House Prices

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Property prices, the confusion for buyers and sellers

September 29th, 2009

Whether you are a property buyer or a property seller it is confusing to hear the plethora of reports telling us what is happening to property prices.  Some of those publishing reports have a vested interest, for example those who represent banks and estate agencies.  To understand what is happening with property prices you need to be aware of some underlying factors to help interpret the reports published.

1 – The data set used.  Some examples are; the property valuations collated by new mortgage lending; the asking prices and agreed prices via estate agents; the land registry actual sold prices.  Each set of data will often provide a conflicting picture of what is happening with property prices.

2 – Timing of reports.  Data is often collated for the previous month, but in some cases it takes a longer period before historic data can be reported with any accuracy.  For example land registry updates after a purchase has completed, this can be weeks to many months.  Such delays make the accuracy of reporting on the “previous month” less accurate, it is only after a longer period has elapsed that more accurate reports can be produced.

3 – Sample size, e.g. how many sales are being completed.  With smaller volumes of transactions the accuracy of reports will reduce.  For example if 100 sales were completed across UK in September, then 200 in October, someone could report a 100% increase in house sales for October.  At the same time if the average sold price of the 100 properties in September was £150,000, then in October the average was £165,000, then someone could report prices had increased 10% in October!  These are clearly small numbers for the example, but they put the point across, until we reach a “normal” levels of sales activity the data will be less accurate.

To sum all of this up…

We will continue to see conflicting reports, some saying prices are increasing, others saying prices are falling.  The fact is that no one knows precisely what is happening with property prices.  Until market uncertainty reduces and banks provide a more “normal” level of lending there will continue to be a higher level of uncertainty about property prices. 

The best guess anyone can make is we are probably near the bottom of the market for residential properties, prices may fall a little further, especially in areas of the UK with poor local economies, but the worst is behind us.

If you are itnerested you can read more about what we think lies ahead for UK property prices in our blog here …. http://www.repaymortgage.co.uk/blog/2009/08/16/uk-house-price-predictions/

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Posted in UK House Prices

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Property repossessions falling

September 16th, 2009

At the depth of the property market crash in the early 1990s the number of repossessions peaked at over 70,000 per year, the good news for the current property market crash is that repossessions seems to be much less.

Data recently published by the FSA reported that the quarterly rate of repossessions is falling, the most recent figure was 13,610, a fall of 1,274 on the previous quarter.  Taking this on an annualised basis it would suggest that the total repossessions for 2009 are likely to be less than 60,000, well down on the 1990s property market crash.

The reported fall in repossessions is down to two key factors.  Firstly the banks and lenders have been under pressure to repossess as a last resort, to give every chance for the borrower to resolve their financial predicament.  Secondly, mortgage interest rates have been historically low, thus giving a lifeline to those who would otherwise have been unable to manage their payments at “normal” mortgage rates.

Overall this is great news, less repossessions means less disruption to the lives of families across the UK.  However going forward into 2010 and 2011 we probably still experience a significantly high number of repossessions, this is due to a combination of factors.  Firstly unemployment is rising and will peak in 2010, but due to the need for cutting public spending the rate of decline in unemployment is likely to be slow, thus making repossessions for many more likely.  Secondly the mortgage interest rates will start to rise from 2010 and gradually move back toward the “normal” rates where mortgage interest of 5% or 6% is typical.  For many the increase in mortgage rates will seem painful and difficult to manage after they have become used to the lower rates.

Our view of a protracted and significantly high number of repossessions over a number of years will have an impact on property prices, whilst these will increase over the next few years the gains are unlikely to be spectacular whilst many are still being repossessed.

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Posted in Stop Repossession, UK House Prices

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What people are saying in August 2009

August 19th, 2009

Reading through the press reports today it seems that we have more contradictory information on the UK property market, however we still stand by our summary published on 16 August … http://www.repaymortgage.co.uk/blog/2009/08/16/uk-house-price-predictions/

One of the leading estate agency companies released a report stating that property asking prices have fallen 2.2% in August 2009, with the comment that this is not a double dip in property prices as they saw a similar fall in August 2008.  Well we disagree, we think that asking prices are volatile in the thin market where the volume of sales is well below the average, we remain confident that we will see prices falls over the winter of 2009 / 2010. 

RICS are reporting that 10% of sales are failing due to difficulties in obtaining mortgages, and this is causing whole chains of buy-sale transactions to fail.  With no short-term improvement seen for finance availability it is likely that this type of problem will continue for some time to come.

Some experts are reporting (such as David Smith of Carter Jonas) that a slight increase in interest rates could have a significant impact on the property market as more homes are put up for sale by those who can no longer afford their mortgages.  We agree with this viewpoint and expect it to have a significant impact especially when combined with increasing unemployment.

On the positive side there are noises coming from Barratt suggesting they maybe about to launch a £500m rights issue.  We think this may suggest they are gearing up for future house building, possibly seeing a demand increase from the back end of 2010.

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Posted in UK Economy, UK House Prices

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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.

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Posted in UK House Prices

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