| Put simply, debt funded the housing boom. | | | | The Budget met with positive industry comments |
| Innovative mortgage schemes tempted | | | | in terms of the increased stamp duty limit for |
| borrowers and this led to demand outweighing | | | | first time buyers and the easing of industry |
| supply and inflated prices. This was unsustainable | | | | regulation. Alone, however, it is unlikely to be |
| in the credit crunch when prices were dragged | | | | sufficient to overcome a mountain of negative |
| back to more realistic levels. | | | | factors particularly as the election hovers |
| The market bottomed in early 2009 at c.20% off | | | | disturbingly over the peak spring season. |
| the peak and since then prices have gradually | | | | Labour has been criticised for its proposed |
| moved upwards. That is until now when indices | | | | increase in National Insurance which may dampen |
| reported a fall for the month of February | | | | demand despite the stamp duty holiday, its |
| although prices differ depending upon which index | | | | promise of more affordable homes and an |
| you favour. | | | | agreement that banks will lend £105Bn to |
| Land Registry | | | | homebuyers/businesses over the next year. |
| Average price GBP164K (for Feb 2010 latest | | | | The Conservatives meanwhile will make the |
| data) | | | | stamp duty threshold increase permanent, end |
| Monthly change down 0.3% | | | | hips and let councils keep more of the proceeds |
| Annual change up 7.0% | | | | from council tax/business rates on new |
| Nationwide | | | | developments to boost the market. |
| Average Price GBP165K (for Mar 2010 latest | | | | The Liberals promise cheap renovation loans to |
| data) | | | | the owners of 250,000 empty homes to get |
| Monthly change up 0.7% | | | | them back into use. |
| Annual change up 9.0% | | | | A hung parliament is likely to do nothing for the |
| Halifax | | | | industry with policy uncertainties likely to push up |
| Average price GBP169K (for Mar 2010 latest | | | | interest rates. |
| data) | | | | House auction prices are often seen as an early |
| Monthly change up 1.1% | | | | gauge as to the future of the housing market and |
| Annual change up 5.2% | | | | auctioned homes are currently selling at a large |
| "The Indices" | | | | discount to the conventional market suggesting |
| Why do key indices paint a different picture of | | | | that prices have yet to fully correct. Regional |
| the market? Simply because they use different | | | | variances will, however, continue to apply |
| criteria. The Land Registry index covers all | | | | particularly in London. |
| completed house sales, even those for cash | | | | "The increase in UK house prices is slowing" |
| (c.30% of all sales according to the Council of | | | | Whilst demand is likely to continue to outstrip |
| Mortgage Lenders) although is restricted to | | | | supply there is evidence that the imbalance |
| homes in England and Wales. The Lenders, | | | | between the two is reducing. Current data |
| however, record prices at the point at which they | | | | suggests that more people are now viewing this |
| agree mortgages and so exclude cash buyers but | | | | as a time to sell rather than buy homes and as a |
| include Northern Ireland (where prices have fallen | | | | result this will help contain upward pressure on |
| significantly) and Scotland. | | | | house prices going forward. |
| To add more confusion, early 2010 was not | | | | QUICK FACTS |
| market typical due to the extremely poor | | | | The average age of a first time buyer without |
| weather conditions and the end of the stamp | | | | parental help is now 37. |
| duty holiday. Our advice: follow trends and don't | | | | In April 2008 the Halifax mortgage rate for |
| switch between index commentary particularly | | | | existing borrowers was 7.25%, over twice its |
| when it comes to time and regional variations. | | | | current rate. |
| So what lies ahead? Consensus indicates that | | | | The Land Registry index, whilst more inclusive of |
| house prices still remain too high with some | | | | data for homes in England and Wales, lags the |
| forecasting a double dip. Evidence to support this | | | | Nationwide Index in terms of timing by c.one |
| lies in the fact that the average house price to | | | | month. |
| income ratio is still much higher than the long term | | | | The house price to earnings ratio now stands at |
| average. | | | | nearly 5.5x having peaked recently at over 6x |
| "The balance of demand and supply remains key" | | | | against a long term average of 4x. |
| Recovery to date has been aided by a significant | | | | 20% of Persimmon's new stock reflects |
| reduction in mortgage rates. Despite this, the | | | | factory-built, flat-packed homes. They predict this |
| latest data suggests that lending has actually | | | | will rise to 50%. |
| declined albeit reflecting a fall in demand and more | | | | February home auction prices were 30% |
| cautious lending criteria. The Bank of England has | | | | discounted. |
| once again held the official bank rate but as | | | | The top end second home market remains |
| lenders compete more fiercely for deposits and | | | | buoyant due to cash buyers and a weak pound |
| their margins tighten this is likely to cause | | | | despite higher taxation threats. |
| pressure to raise mortgage rates which will feed | | | | Cornwall remains one of the hottest second home |
| through to prices quickly as the market is | | | | locations. |
| dominated by short term deals. | | | | LONDON MARKET |
| Demand will also continue to be negatively | | | | London benefits from an acute shortage of |
| impacted by: household wealth driven by | | | | homes as well as higher overseas demand. This |
| continuing unemployment, shorter working hours, | | | | has recently been further boosted by the |
| wage freezes, taxation and inflation; the fact that | | | | weakness of the pound. |
| government schemes cannot continue to support | | | | Over the past few months the London market |
| mortgage lending indefinitely and; the need for | | | | has also been favoured by the upturn in the |
| banks to raise equity and strengthen their own | | | | financial services sectors. |
| balance sheets if they are to continue lending. | | | | The price of the average home in the Capital |
| On the supply side, recovery to date has been | | | | differs depending on your choice of measurement. |
| built on the scarcity of homes for sale as owners | | | | This ranges from GBP270K to GBP370K, twice |
| have been unwilling to lock in losses, housebuilders | | | | the national average. |
| have cut output and planning authorities have | | | | Trends indicate strong annual growth although |
| fallen well short of government targets. In Jan | | | | month on month rises are slowing with the Land |
| Feb 2010, however, the supply of homes | | | | Registry reporting a 0.5% fall in prices last month. |
| increased as sellers returned to market and | | | | CB Richard Ellis estimates that you need an |
| builders increased activity and in March the growth | | | | average salary of over £56K to support a |
| in the number of homes coming to market | | | | mortgage in London. |
| actually exceeded new buyers registered. | | | | With its greater number of high earners with |
| With initiatives such as Persimmon's "flat-packed" | | | | expensive properties, London is likely to be most |
| homes, supply can quickly match demand and, | | | | impacted by the forthcoming election outcome. |
| with the average landbank now pushing upwards | | | | This is due to Labour's proposed tax increases on |
| to nearly 6 years, there is no shortage of land on | | | | both income and top end stamp duty. |
| which to build such homes. This should prove | | | | New initiatives in the Capital to aid homebuyers |
| helpful to soak up pent up demand when hopefully | | | | include "Pocket" homes. These represent cheap, |
| the country settles post-election. | | | | extremely compact homes aimed at key |
| "We currently remain in a state of political and | | | | workers. |
| economic uncertainty" | | | | |