House Prices
adapting to market conditions to prosper
Major changes over the next few months aren’t expected but the challenging economic conditions are likely to lead to more easing of house prices
by Jon Round, managing director First Complete
Overall, the final results for 2010 weren’t too bad; both house prices and rental yields rose, which was great news for homeowners and even better news for people with investment properties. But that was not the whole
story. Whilst the outcome for the whole of last year has a fairly positive tone, there are already some warning signs at the start of 2011. House prices were falling in the latter part of the year and we expect them to continue to drop in the first half of 2011. The good news is that we don’t expect prices to fall significantly, rather they will decline at a relatively gentle rate. The falls are mainly due to the well documented restriction in lending which continues to make it challenging for people to get a mortgage and buy the house that they want. On top of this, there is also a real sense of economic uncertainty at the moment; everyone is aware of the Government cuts to come,
42 mortgage introducer FEBRUARY 2011
but many people are not sure how they will be affected individually. This has an impact on confidence, leading to people delaying their house moving plans until they see how they are affected. As a result, the number of housing transactions continues to fall as a growing number of people are reluctant to take on higher borrowing in case they are one of those to be affected by Government cuts.
Behind this, in the lender space,
there appear to be two categories of lender: one type of lender has expressed the very welcome intention to lend more over the coming year and to boost the amounts that people can borrow. But the lenders in receipt of money from the Government’s Special Lending Scheme still have a significant amount of debt to pay back and it will be incredibly challenging for them to increase lending at the same time as paying this back. The Government is making noises about encouraging more lending from both types of lender, but few concrete ideas have emerged as yet.
Of course with fewer housing transactions there has been an increase in the number of people renting.
• Average house prices recorded a marginal fall of 0.2% in December
• Over the 12 months January to December 2010, house price growth stood at 2.9%, compared to 5.3% in 2009
• Regional disparities widen In December
• The number of transactions fell by 5% in December 2010
• Rents fall by 1.2% to £684 per month in December – the first fall since January 2010
Throughout the year rents have risen inexorably, but December saw the first drop since January 2010. At the same time there has also been a rise in the number of rental arrears, though this is largely a seasonal impact around the Christmas period. Interestingly, lenders seem increasingly to view buy-to-let as a higher margin sector and we expect to see more lenders enter this market as the year wears on. This is great news for the mortgage intermediary industry, as this is the sector of the market that is most
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