House Price Spy Blog

The budget for 2011 did not bring much cheer for the property sector, the feeling is that the government continued the token gestures of the last government but in fairness with inflation rising to 4.4% there was little room for movement.

£250 million of tax payers money has been pumped into breaks for first time buyers, and many people are sceptical about the genuine benefits of this. Tax payers subsidising the worst risk home owners, it has not been proven that any of the billions of pounds new Labour pumped into this area was well spent. With mortgage finance harder than ever to get I am not persuaded this is more than a token effort.

On the plus side changes to planning permission legislation could pave the way for an increase in new build houses and changes to stamp duty could be just what was required to create movement on the market. But these small changes were all that could have been done.

More important to most householders will be the mortgage rate, still standing at 0.5% many are predicting a rise within the year. With inflation up at 4.4% it is a safe bet it will rise in the months to come.

The average asking price of a home in the UK has risen for the third month in a row to over £230,000. Is this the start of an upturn? The actual volume of sales is still down and the lack of mortgage finance has not been addressed so no change there.

The average number of unsold properties per estate agent has also risen to 70 per estate agent, so despite asking prices rising there has not been a rise in sales in real terms.

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The Council of Mortgage Lenders have released figures that point to a proper recession rather than the mild version we have been experiencing, with mortgage lending down by almost 25% at the start of 2011 we could be returning to 2007 prices before the end of the year.

Borrowers are having to borrow up to 5 times their yearly earnings which is putting a spanner in the works for the finance industry whereas it was 6.4 times for 2007, a smaller group of buyers can purchase property and this is bringing prices down as demand falls. Also most most mortgage providers require at least a 20% deposit which prices out many first time buyers and others who find their earnings dropping and the cost of living rising.

What can the Bank Of England and the Government do to halt this slide? They are at least sticking to their pledge of not returning to pre-2007 levels of free lending but would a rise in the mortgage rate actually help?

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