Calculators

The Housing Market - light at the end of the tunnel?

July 2009

The Housing Market - light at the end of the tunnel? A combination of exceptionally low interest rates and plummeting values has made house prices more affordable now than they have been in years. The latest figures from the Halifax show that, despite a small pick up in May this year, UK house prices are still over 16% down on a year ago.

Speculation that 'panic selling' by buy-to-let investors could send house prices down did nothing to boost morale in the market. However, these concerns were probably overstated as new instructions to sell are falling back. On the other side, the latest survey from the Royal Institute of Chartered Surveyors (RICS) suggests that the number of potential buyers registering with estate agents has now increased every month for the last seven, with those in London reaching the highest levels since October 2006.

Nevertheless, there are still some issues holding back a proper rebalancing. Cautious mortgage lenders are still managing to derail the hopes of first-time buyers by insisting on high deposits and perfect credit scores. Indeed, one South East surveyor suggested this is 'the key factor stifling recovery'.

Coupled with the ongoing lack of consumer confidence, caused mostly by the threat of job cuts, many potential buyers are still being put off. However, whilst the number of new instructions to sell is falling, driven partly by prices but also, RICS suggests, by the impact of Home Information Packs, prices have stabilised and confidence, to an extent, has improved.

Looking ahead, there are some tentatively encouraging signs. The combination of increased demand and reduced supply led to the Halifax reporting a surprise 2.6% increase in prices in May. One number on its own does not make a trend and it needs to be considered in the context of a 3.1% fall overall for the three months to May compared with the previous three months, but it is still the first positive move in a while.

At the same time, the Council of Mortgage Lenders has suggested that mortgage approvals for house purchase were up 16% in April over March. Levels from which these increases are being measured are very low, but, as one surveyor in London pointed out, there is at least 'light at the end of the tunnel'.

Shirebrook Financial Services Ltd is authorised and regulated by the Financial Services Authority. The contents of this article do not constitute advice. Before taking any decisions, we suggest you seek advice from a professional financial adviser. All figures and data contained within this document were correct at time of writing.

The Housing Market - light at the end of the tunnel?

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