Rock the Casbah

If you think that the road to recovery in the UK property market is somewhat rocky then spare a thought for Dubai. With prices down 50% from their debt-fuelled peak the Dubai dream has lost a lot of its lustre. By comparison the property market in Blighty looks rather good!
Of course, not all Rocks are bad. A fact born out by the EUs decision to allow Northern Rock to be split into a “good” bank and a “bad” bank. Mortgage Finance Gazette reports this will allow the State-backed “good” Rock to more than double its mortgage lending from £4bn in 2009 to £9bn in 2010. Which is good news for the UK housing market going forward. With the supply of credit continuing to be squeezed in 2010 any increase in lending should help underpin a modest growth in the number of transactions. However, outside London and the South East don’t expect much by the way of real price increases. A flat (ish) market is more likely. Not so much Rocky as undulating. So you see things do seem to be getting a bit better.
Anyway, since this is the last of our ramblings for 2009 here’s wishing all our readers a Very Merry Christmas and a Happy New Year. Hope to see you in 2010.

Lost in the supermarket

We were surprised to receive a call the other day from a pleasant enough chap who wanted to know if we would like to advertise our properties in Tesco. Now we’ve got nothing against Tesco (nor ASDA for that matter who had a rather unsuccessful foray into the estate agency business recently) but the prospect of encouraging Joe and Josephine Public to treat buying a home the same way as buying beans did not seem to us to make sense. Particularly when the OFT has just published a detailed survey into what the public most want which includes:-

Good advertising/marketing
Help with arranging viewings
Guidance on the selling process
Advice on market appraisal/valuation
Help with negotiations
The convenience of accompanied viewings
Advice on offers
A good conveyancing service
Help with HIPs
Someone who will help them get the deal done.

Professionalism and reputation were the most valued attributes. Only a minority of sellers based their decision on the level of fee. It appears the public is rather more discerning than we may have been led to believe. What’s more if you go to the right agent you can even get Waitrose quality at Tesco prices. So you see you can shop happily after all!

Working for the Clampdown

The FSA Discussion Paper “Mortgage Market Review” has already attracted quite a lot of press comment…..”No more Liars Loans” (self-cert mortgages to you and me), regulation of “buy to let” mortgages, interest only loans under the microscope etc etc. This is all the stuff of headline writers. However, there is something more fundamental at the root of changed FSA thinking – “We believe that irresponsible borrowing has been just as much a part of the problem in the mortgage market as irresponsible behaviour by firms”. You see, for years the FSA believed in the notion that the free market model is perfect. “Our policy approach to date has been underpinned by a view that mortgage consumers will act rationally to protect their own interests”. So regulation wasn’t necessary! No, seriously, that is what they thought! But now “We believe that we need to change that approach, recognise the behavioural biases of consumers and be more interventionist to help protect consumers from themselves”. So there you have it. The Punch Bowl may have been given back to the City Bankers but Jo Public will no longer be able to gamble on the housing market. It seems that there is a determination to prevent another unsustainable rise in house prices. Truly “No more boom and bust”. So sitting tight and hoping for a return to the dizzy heights reached by prices in 2006-2007 does not look like a viable option. Does it?

It's London that's turning

Most of the media in this country is London centric. So when the property market in London shows signs of improving then the National Headlines scream “Green Shoots of recovery”. The fact is that the London market is isolated from the rest of us. As a leading world capital London has always attracted purchasers from overseas and the combination of falling house prices coupled with the pounding that sterling has taken on the currency markets makes London look pretty cheap…….if you’re buying in Euros! When the national house price statistics are compiled London’s inclusion distorts them. If you look at the detail then the English Regions including the West Midlands are continuing to struggle. However, there is some good news as we have definitely seen sale volumes picking up (albeit from historical lows) and the prices achieved for some types of property have begun to stabilise. Whilst it’s London that’s turning at least we’ve stopped burning!

Darling can we afford £1750 on another holiday?

In September last year Chancellor Alistair Darling introduced a Stamp Duty “holiday” to try to breathe some life into the stricken housing market. The previous zero rate threshold was increased from £125k to £175k. The resultant saving of up to £1750 was a welcome relief for first time buyers faced with the need to find bigger deposits and tighter loan to value ratios. However, the Holiday is due to end on the 31st December unless the Chancellor relents and extends it in his pre-budget announcement due roundabout November. With the Treasury strapped for cash it would be unwise for buyers to bank on Darling delivering this time round. If you’re budget is up to £175k then you need to act quickly to be sure of securing this important saving.

Should I stay or should I go?

A lot of people are agonising about whether or not they should bring their property to the market. Mention of “green shoots” and a recovery in the wider economy has been building a false expectation that house prices will surge at some time in the near future. Why not sit tight and wait for the market to recover? It could be a long wait. A look at the housing derivatives market sees traders forecasting a second dip in prices in the next couple of years, a small bounce back thereafter and then stagnation for some years to come. RBS (not renowned for its ability to predict the future) is looking at a double digit fall next year whilst the RICS (not much better at forecasting than the met office) is talking about price rises towards the end of this year although they are rather coy about future trends. So if indecision is bugging you then now might be as good a time as any to test the water before everyone else starts taking the plunge!

Political Posturing

“A proposal within the Green Paper on Quality and Choice aims to ensure that everyone has the opportunity and greater choice of a decent home….it emphasised the need to examine the potential for mortgage backed securitisation in the UK as part of developing a more efficient delivery mechanism for mortgage products”
“Fannie Mae (the US government backed lender) has a target to lend a trillion plus dollars to marginal home-buyers”.
Both of these quotes come from a research paper published in September 2003. So when the Chancellor is reported as summoning the bankers to number 11 for a ticking off they may well remind him that we have got into this mess because politicians on both sides of the pond wanted to artificially raise the level of home-ownership. They even relaxed regulation to let the Bankers rip and boy did they do that with a vengeance! Going forward you can expect policy makers to start changing their tune. Expect the rental sector to flourish as higher mortgage costs keep a lid on significant house price rises for a very long time indeed.