House Price Spy Blog

Its a buyers market with keener pricing taking us back to 2006 prices (and beyond), that means there are bargains to be had everywhere on desirable propeties that may have been previously out of range or just getting a bargain.

There are always people who play the ‘boom and bust’ just right, buying low and selling high and now is the time for players to snap up bargains which will grow in value in the years to come. The business elite is full of people who did their homework and bought at the right time….

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There are still people selling properties across the countries and with many external concerns (job loss, retirements, bereavement etc) to take into account it may be time to snap up a bargain. In addition, with less people buying to let the demand for rented accomodation in reliable areas is still strong so this could be an option for people with enough of a deposit available.

There are bargains to be had, and (despite what you may have heard) finance to be had. As always it pays to do your homework more carefully than ever, seeing which areas are reliable and which cannot be considered for one reason or the other. Prices are set to drop during 2009 but many people are seeing a rise after that so dont delay too long!

Below are the price trends for the UK by country from House Price Spy data, the price trends have been changing in late 2008. Scotland has finally seen a downturn, whereas England has actually see a rise in December.

To see the price trend for England for late 2008

To see the price trend for Scotland for late 2008

To see the price trend for Wales for late 2008

Scotland seemed to be the only country to keep their gains, while not growing as much as before while England had seen the largest previous rises and was most susceptible to a contraction in prices. From the figures the number of sales is still falling, this number will have to rise before prices start to recover. The Council of Mortgage Lenders has released its fuigures for the last year only 500K mortgages were approved, while 2007 saw 1 million approvals.

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The Bank Of England has announced that the mortgage rate has just been reduced by 0.5% to 1%. The major lenders have pledged to pass this saving on as much as possible.

This is the lowest it has ever been, giving every mortgage holder a real boost in the cold weather. Can this level be sustainable? Only time will tell.

This does not give lender much profit to play with, maybe the BOE thought that lenders were putting their shareholders first previously and want to give some cash to the general populace. As mentioned, hopefully this money will not be found at savers expense or at the expense of new mortgage borrowers.

The Nationwide and Halifax building societies are both stating that the average prices of property in the UK has fallen from around £200,000 to around £159,000 or about 20%.

The CEBR (or Centre for Economics and Business Research) is predicting that we will lose the same again before the downturn is over. They also predict that prices will bottom out during 1009 and start to rise in the 12 months after that. Prices will return to previous levels in around 2013.

This is quite a pessimistic view, many insiders are stating that we might see significant improvement during early 2010. It’s fair to say that for the price increases we say in the early/part of this decade we could have to wait much longer than that-but to be fair we all realise that was artificial and could not be sustained. For the economy to get back on its feet and jobs to start to appear again it will take much longer.

I think we all agree that while property prices are an important indicator of what is happening, jobs and the general economy are our bread and butter. However people who are retiring this year will be worried, Gordon Brown encouraged us to take out personal pensions just a year ago and now these people dont have the working time to replace this cash. Retire at 65? More people will have to work longer to pay for this mess..apart from young people who cant open businesses due to the lack of loans being granted.

The Bank of England have reported that mortgage lending doubled during December 2008 to £1.9 Billion from £834 million. This is only a quarter of the figure for December 2007 but shows how changable the market is, the numbers of approved mortgages doubled from a record low of 27,000 to 60,000.

Everyone will have seen on the news and media this week that the IMF (International Monetry Fund) have stated that the UK will be hardest hit from any major country in the coming recession due to its involvement in the finance crisis and the subsequent bail out packages that have been made. Most developed countries are expected to contract by 2%, the prediction for the UK is 2.8%. Gordon Brown pledged another £200 Billion to prop up the economy this week.

The other major story of this week has been that buyers are now entering the market again, looking for bargains. Make no bones about it with a buyers market there are loads of bargains to be had if you search long enough and you know the market well enough. If you know a particular area is strong and you see fixed prices on the market for a while you could be onto a bargain. For all the doom and gloom, buyers just have to be a little bit more conservative about paying no more that (the current) market value for a home no matter how much they love the property and maximising what you get for your properties. The days for viewing a property and entering a bidding war are over, you have to have a absolute figure in mind based on the area, the property and the market and stick to your guns.

House Price Spy is the perfect way to do your homework on the property market without spending anything. We will update you monthly, give your free extras such as statistics and alerts and much more!

The number of mortgages approved in 2008 was only 48% of the value for 2007, while numbers have actually risen in the last month or so the number is dramatically down on 2007.

What factors are causing this fall:

Less month in the economy

Falling property prices

Less money to be lent by finance industry

Unemployment rising.

What is being done to address this trend:

Bank of England lower mortgage rate to record levels

Stamp duty laws changed.

Government pledge to build more new housing than ever.

Government want to force lenders to lend even if the terms wont be attractive to them.

If you saw the BBC2 show on the great US stock crash of the 1920s (which caused the Great Depression) you will see the parallels. Leader overlooks sharp trading by the finance industry while economy grows, ignores warning signs and warnings from senior industry figures. Initially tries to inject money to stablise situation than backtracks, Hoover the President was voted out resoundingly afterwords and you woiuld not bet on the same to happen to Gordon brown. The parallels dont stop there, the US government under Hoover encouraged people to invest heavily in the American Boom and the Global Economy while insiders made decisions that affected the very nation. Stock market bonds were bought up at 25% of the face value, with the holder borrowing the rest. When stocks fell, traders call in the remaining cash bankrupting the stock holders. Big companies, traders and finance insiders all made huge amounts of cash leaving the average Joe owing 75% of nothing. Anyone who currently has negative equity on their property will know the feeling!!

There are load of predictions about the property market and the financial situation. The property market is well known to be the main indicator of how an economy is doing, with lending down to record levels and the Bank Of England slashing the mortgage rate month on month there is less and less money to be made and therefore lent by the finance industry.

There are plenty of predictions to when property price will start to rise again, in the last couple of days I have read contradictory time periods one of 2 to 3 years and 1 year, however it looks like the end of 2010 as a safe bet.

Meanwhile, Irish banks (Anglo Irish Bank and Bank of Ireland), once seen as the savior of millions of invested Pounds Sterling are now warning savers that they are no longer covered by the compensation package issued by the UK government. Any compensation would have to be given by the Irish Government, this comes after a decision by the FSA after the Icesave collapse last year.

A joint report by Morgan Stanley and Royal Bank of Scotland Group is predicting that on average properties will lose as much as 45% of their value from August 2007 to late 2010. To bring this into perspective a report by the Nationwide states that the average property in the UK has lost £30,000 bringing values back to 2005 levels, this based on an average property value of £150,000.

Billions of additional public money will be used in a second bail out of the UK financial industry. The figure given by the Chancellor is ‘hundreds of billions’ this comes after billions (£37 to be exact) were invested into the industry to prevent the collapse of HBOS, where this cash will come from is unclear-will it be added to the national debt or some other method of raising money used.

Senior government have stated that the economy is now in a worse situation than previously with an expected 2 or 3% reduction in growth for 2009 rather than the 1% previously predicted. Below are a few key points on how this money will be made available:

For a fee the government will offer security on certain loans, the lender will pay a fee and pay part of the loss.

The CGS or credit guarantee scheme will run untill the end of 2009.

Assistance for Northern Rock

Discount Window Facility from the Bak Of England

Asset purchase facility from the Bank Of England

The Royal Bank Of Scotland has announced record losses of £28 billion.

Alistair Darling’s plan to give struggling mortgage holders in the UK ‘payment holidays’ has been dismissed by lenders. With lender profits falling dramatically the amount of money available for lending has fallen meaning that if borrowers ventured into the property market they would be likely not to get good deal on their mortgage or not get a mortgage at all. The finance sector has now come out and said that plans to give borrowers ‘payment holidays’ would mean a further constriction on available finance.

While it is no surprise that certain mortgage products are not available and we are not getting as good a deal as we did in 2007, the main problem with the current crisis was that the finance industry was relucant to lend at prohibitive rates and for the problems to be alleviated we dont need lenders to lose more money

Once the finance sector has sorted out its problems and is properly regulated it can start to lend more money at better rates. If the money is not in the system they we cannot borrow it, we cannot expect lenders (as money making concerns) to lend at unprofitable rates.

Payment holidays would put further pressure on the system, while they do sound a good soundbyte for the media they will not assist in the long term. People who were more sensible in getting a suitable mortgage will again be supporting those who overborrowed.

While there is hysteria about people losing their homes payment holidays are not a long term solution (unless you can get a gap for 2 or 3 years) but then we will end up payment more in some other way.