Latest housing market trends show no signs of recovery

The most recent comments to emerge from the government has been that of Margaret Beckett, Housing Minister, who implied that there were signs of recovery in the market and advised first time buyers to snap up bargains.

While clearly incorrect in terms of there being a market recovery, Beckett is far from wrong in that there are bargains to be had. The problem is, of course, getting ones hands on the money to buy them.

With houses already selling at up to 25% beneath the peak, and with further reductions expected over the course of the coming year, it is clear that those with access to funds stand to do good business; house prices will recover in time, and if one has the ability to hang on in there then it could be that 2009 is the year to buy.

Banks are naturally reluctant to lend at the moment. The Royal Bank of Scotland announcement of a £28 billion loss, the biggest ever in history, is testament to the trouble that the financial industry is in. However the UK governments hefty cash injection could, according to some, be the tonic that creates a revival in lending.

In an interesting U-turn it would seem that Northern Rock, subject of a massive loan from the government in recent years, has begun to encourage borrowers to remain with the bank having recently been keen to see them go elsewhere once their deals had come to a close.

Nationalised banks that begin lending again will certainly have an effect on the market situation, but will it be enough to aid recovery in a significant manner?

Shoring up the financial market is cited as an absolute necessity by industry insiders, but the worry is that the banks will continue to be reluctant to lend. It is important, therefore, that we keep a close eye on how the housing market is influenced in the coming few months.

There can be little doubt that the banking crash has changed the way mortgages will be obtained for good; reduced lending and bigger deposits are now the norm, and the days of 120% loans are long gone.

One thing is playing very much into the hands of borrowers, however, and that is the continuing reduction in interest rates applied by the Bank of England. Currently at an all time low, those with tracker mortgages stand to benefit. Anyone looking for a new tracker will undoubtedly find it no longer available.

While it is so that there are buyers out there it is also a fact that unemployment is on the rise. This paradoxical situation will lead to a further fall in prices as those who lose their jobs face the prospect of having to sell, and those who have the funds look to bag an expected bargain. Repossessions are on the rise again, and will continue to be for the coming year at least.

The ‘green shoots’ of recovery will be notably absent for the foreseeable future if industry analysts are to be believed, and the UK faces another year of turmoil in the housing market. The government appears to be doing all it can to encourage lending but to restore consumer confidence will take more than a vast injection of cash.

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3 Responses to “Latest housing market trends show no signs of recovery”

  1. Your facile statements and property bullishness are galling in the face of the present economy. You might know your stuff (I won’t presume to call you ignorant) but you are making ridiculous, unjustified claims based on a political or personal agenda.

    A 25% percent decline in a few house prices does not a market make, nor does it make a bargain. You are simply tossing out a random percentage (which looks attractive to buyers…”Gosh, a twenty-five percent discount. What a deal!”) without putting into the market framework. To begin with, how about discussing the relative level of house prices versus incomes, indebtedness, inventories, or historic increases. A 25% decrease in prices from a peak that represent a four fold increase over ten years is hardly a bargain.

    Anyone buying a UK property in 2009 will bitterly regret his purchase, though not as much as someone who bought from 2003 to 2008. Houses in England are simply not affordable and have been rising on the tide of the most massive credit bubble in history. With the City dying and its bonuses disappearing, London and its suburbs will collapse. The rest of the country, which never had the salaries to justify any part of the bubble to begin with, will also collapse.

    But let’s put this “collapse” into perspective. Let’s look at where prices should be instead of where we wish they were (assuming you own your home already and want to sell). I don’t have the information for England but the 150 year median house price to income ratio for America is 2.8 meaning that someone earning $50k can afford to buy a USD140k home.

    What is the median household income in England? I would guess that, given the higher tax rates, the affordability ratio is not higher than in the US. Then tell me if buying a house in 2009 is a bargain.

    This sort of sloppy, jingoistic propaganda is what has led to England’s downfall and economic ruin. You should be ashamed of yourself and issue an apology to your readers.

  2. Here here. We’re in a mess with the economy, because of outragious bullish sentiments, by banks as well who should know better.
    Housing will revert to the long term averages, as per above reply. How it gets there and the mess and over shoots that will happen, is unsure.

  3. Ex Pat is dead on…The United States is in a deep recession and many layoffs are still to come…We have a bunch of gangsters running Wall Street. In China they take these kind of folks and put them in front of a firing squad. Maybe that solution would restore confidence to Americans who have witnessed the whole sale theft of their 401k’s and Life savings by being seduced away from defined pension plans into the open market place where Al Capone would seem a piker! The United States cannot print it’s way out of this mess that deregulation from Clinton to Bush has created. Meanwhile Obama has Robert Rubin advising him when
    along with Larry Summers his kind repealed the “Glass-Stegal” act and let the crooks in the front door and the derivative markets went haywire! So hear ye hear ye Village Idiots! If you want to double your money..take it out of your back pocket fold it in two and put it in your front pocket.And stop listening to these same folks who want to separate you from your money. We are in the second inning of a losing ballgame!Hold onto your money houses will get a lot cheaper!

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