Once again house price data is proving to be at best conflicting and at worst downright confusing. Lenders say prices are on the rise and estate agents and surveyors say they are on the way down.
A few things are clear. Central to the housing market’s failure to really recover is the difficulty experienced by homebuyers to qualify for a mortgage or find a deposit, or even a bit of both, and any rise in house prices is probably due to the shortage of quality second hand properties on the market.
Demand exceeding supply, which in the UK housing market has always fuelled house price inflation, will still be present in the future due to the collapse in new home construction. However, if prices do go up again, who in the continuing mortgage drought and loan to value environment will be able to buy a new home? Probably not the majority of first-time buyers.
It is, therefore, interesting to see the hugely positive response to the New Homes Marketing Board’s call for a Government supported saving regime to help young first-time buyers get onto the housing ladder. Although this is a scheme suggested by the NHMB, perhaps these incentives should also encourage new entrants to the housing market to buy a second hand property and bump start moving chains. This could provide purchasers for larger brand new properties further up the chain.
It is also interesting to see large funders looking very hard at moving into the rental market. Some big financial thinkers must see an opportunity in providing homes for those who will not qualify for a mortgage in the future.
In the conventional housing market it is encouraging to hear that some high profile housebuilders are beginning to report increased visitor and reservation rates.
Is that the smell of confidence in the air or just an attempt to create a feel good factor?
Already someone has suggested that the recession will soon be over. Whoever it was, it certainly was not the Bank of England Governor who recently warned that the recovery of the British economy would be ‘slow and protracted’.
The trouble with a spark of recovery is that if you fan it too hard it could go out. The Government must manage customer expectation so that if the immediate end to the recession does not materialise, society is not sent into another downward spiral of consumer despair and spending entrenchment.
Things do feel better, which could be a result of the money the Government has been pouring into the economy, and some countries have crawled out of recession. Not sure it’s our turn to climb out of the pit just yet but a further slowing in GDP’s drop or even an upturn, which is not that far fetched, would be nice at the end of the third quarter.
The war won’t be over by Christmas but hostilities are decreasing and things may well be a lot better in the New Year.
More information from david@ferrier-pearce.co.uk
