House Price Spy Blog

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While US financial giant The Lehmann Brothers recent colapse wont mean much to many of us the dramatic bailing out and ‘closing down’ sale of HBOS (Halifax Bank Of Scotland) to Lloyds TSB will have raised a few eyebrows across the finanacial world. it was only a few short years ago that Bank Of Scotland were THE big beast in UK finance with ordinary savers and investors complaining about the sky high profits that were being made, and also about how ethical the money invested in BOS was.

A few years down the line and upward of 40,000 HBOS employees are facing Christmas on the dole, and the government has had to bend monopoly rules to accomodate the amalgamation which allows HBOS to avoid going bust. HBOS/Lloyds TSB will have a huge 33% of the UK lending market.

50% of the value of HBOS stocks were wiped in the space of one day and this raises questions about the stability of UK finance. Questions about Gordon Brown’s role in the ‘borrowing culture’ that existed during his chancellorship have arisen, how could a previously ‘prudent’ financier inspire so little confidence?

After The Northern Rock and US problems the UK government has set a trend of forcing lenders to change their ways and become more realistic, what this will do for competition in the marketplace where lending is down to a 20 year low and many lenders have withdrawn previous loans.

While supporting financial institutions is all very well for the overall picture how does this affect the consumer in real terms? The whole mess has been caused by mismanagement by lenders rather governments charging too much stamp duty, or even borrowers paying too much for property. The government should use it’s time coming up with a medium term legislation for lenders in terms of what they can offer, to whom and rules about inter-lender finance.

It should be noted in all this that £35,000 of your savings are guaranteed, so if you spread your savings across a few lenders and types of investment there will be no problem. Gordon Brown was telling us a few months ago to save more for our old age…with many pensions halfing in value in recent days this is looking like folly!

The property market has been the main topic of discussion in the media and it does now appear the both the UK and US governments are concerned enough to put serious money into working through the slump in prices. Since my last blog, the US government has invested billions in two ailing financial institutions while Gordon Brown has pledged billions to raising the lowest level of Stamp Duty and bailing out struggling borrowers who mortgaged in more bouyant times.

With speculation over the future of the PM in terms of his leadership and the upcoming election this could be the last gamble Gordon Brown has to offer. The ‘Tony and Gordon’ package profited massively from the inflated property market in the last 10 years, and now are counting the cost of the inevitable re-adjustment in prices to a viable level.

The backdown on 10% income tax was fairly embarrassing, but this seems to be the one thing which could tip the balance away from New Labour with less than promising poll predictions and by-election results.

Hopefully we will see a bit more leadership in the months to come, with a plan which they stick to! There have been two or three backdowns in recent months (Northern Rock, 10% income tax etc) which never looks good. Are the government expecting people to run out and sell their houses for thousands less just to save an average £550 on Stamp Duty, sounds like a hollow promise-at least we wont have to find billions to fund it if no-one takes it up!

I see there was a property related article on the BBC site, which had an estate agent who offered house swop where you can trade your home for another one and ‘match make’ buyers to sellers like a property dating agency. A few months ago developers were potential housebyers to try new build houses for a weekend to see whether they were suitable or not. Both of these are preferable to the governments announcement of this week that they were going to spend billions of taxpayers money in raising the minimum level of 1% Stamp Duty to £175 rather than the previous £125.

See the whole clip at the BBC site

From the stats we have the average price in England is £230,000, which is the same as last year. The recent government action will give an average sale an extra £550 but average prices should have risen by from £10,000 to over £20,000 during the last year so this a drop in the ocean.

Last year – £230,000 – £125,000= £105,000×1%=£1050

This year – £230,000 – £175,000= £55,000×1%=£550

£550 is not enough to get the property market going, but by the governments figures will cost us billions. By my figures (and bear with me here):

There are an average 100,000 sales in the whole of the UK per month so 100,000×12 monthsx£550 Stamp Duty=£660,000,000 (£0.66 Billion) to give a tiny £500 help! How many council houses could you build for that Gordon?

Gordon Brown and Alistair Darling have made a move to quell the recent unrest about house prices and the apparently impending recession by giving every seller a year long boost. The previous lowest level where you paid Stamp Duty 1% Tax was £125,00, this has now been raised to £175,000. This will last for 1 year from Wednesday 3rd 2008.

Also announced today were measures to help people struggling with large mortgages with increased rates of interest by giving councils and Social Housing Landlords the power to pay off mortages while charging reasonable rents. This money will be found from previous funding and ‘brought forward’ to improve housing in the short term.

Conservatives and Liberals have condemned these measures as short-term solutions and as an attempt to save Gordon Brown from Election defeat or being ousted by his own party.

With the cost of living rising and the global economy facing the worst slump in 20 years, its unclear what Brown could do, the UK property market has been inflated for most of the 21st century and many people are seeing this as a sensible re-adjustment rather than a collapse in prices. People buying in popular areas will never lose much, however builders and speculators may lose out in the medium term.

Where will Gordon Brown be finding the money to pay for this? Millions of pounds will have to be found from somewhere, since someone like me (who bought property last year) wont be moving in the near future I am not keen to fund others just to boost the number of properties sold and artificially raise prices. The government also announced that households earning under £60,000 will get ‘interest free’ loans to fund property.

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The latest property figures have confirmed what we all know, sales are down to pre-1990 levels and desposits are up to an average of £37,000. Mortgage lending is down by 65% on figures for July 2007.

This is not of course great for first time buyers and those on low incomes who are already on the property ladder, usually you would have said that the government would offer support to get more people back buying property and spending money but with the present financial crisis you wont hold your breath! The London Olympic bid will be a huge expense and I am sure there are quite a few world leaders relieved to have that multi billion pound burden to bear in the next few, lean, years.

Another point made by the BBA was that reposssesions in ’sub-prime’ mortgages was up, lenders have raised their rates on these types of mortgages and few companies are now offering them. Government action would be appreciated on this point, lenders offering mortgages which are out of scale with earnings and then removing them when times get hard leaving homeowners with nowhere to go as other lenders have had the same thoughts. Attracting borrowers in with low rates and 100% mortgages and then going back on their pledge when the financial outlook changed!

All figures from the BBA or British Bankers Association.

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I saw an article in the papers today saying Scottish leader Alex Salmond claimed that Scottish house prices were up and some from a leading estate agents counter-claiming that they had gone down, from the figures we have it’s quite conclusive that they HAVE gone up. Number of sales is of course way down on 2007, that is why estate agents are all doom and gloom.

The average first time buyer in Scotland had a 3% larger deposit than the previous year at 13%, however there were a third less mortgages granted to first time buyers than this time last year.

Below are areas in Scotland with a rise in average house prices (prices rounded down):

Aberdeen City – July 2007 £178k – Jun 2008 £185k

Aberdeenshire - July 2007 £187k – Jun 2008 £188k

Argyll And Bute - July 2007 £162k – Jun 2008 £179k

East Ayrshire - July 2007 £114k – Jun 2008 £131k

East Dunbartonshire – July 2007 £189k – Jun 2008 £214k

Highland - July 2007 £154k – Jun 2008 £189k

Orkney Islands – July 2007 £235k – Jun 2008 £294k

Perth and Kinross - July 2007 £173k – Jun 2008 £193k

South Lanarkshire - July 2007 £135k – Jun 2008 £139k

West Dumbartonshire – July 2007 £108k – Jun 2008 £110k

These are obviously averages from all the data however you may see a localised drop in prices where you are.

The figures for Scotland in 2008 are January £151k and June £159k so Mr Salmond could argue that while England was down by an average of £8K in that period Scotland was doing better that the rest of mainland UK

Check on your local area to see whether your area has gone up or down, House Price Spy is free and gives you all the property information you need to keep an eye on the market locally or nationally. Help to spread the word about our great free service, tell your family and friends to join up for free!!