Editor's blog

ON THE BRINK ?

 

ON THE BRINK ?

 

Which way is the property market heading? And should it matter? In days gone by houses were bought with whatever cash people had but the rise of mortgages has changed that scenario forever and changed also the value of property upwards in the process.

 

So it should come as no surprise, that when the banks tighten the screws on lending, values dive south. This is accentuated in the north of the Country with its huge over supply of terraced houses and few people to buy them. Historically location has been one of the other significant factors.

 

Today this combination is just as important. Whether banks want to atone for the last few years of horror or try to put themselves in a better public light is another question but there is an easing of cash supply and banks are beginning to make more mortgages available. It can’t be wrong to continue to have a base rate of 0.5% and there is a possibility that the Euro problem will be solved.

 

Things could happen quickly on the financial markets if that becomes the case and you wonder who is going to be left behind. The Coalition have little option but to pursue their current policies and good luck to them. But they will also know that to be re-elected there needs to be a reasonable feeling of prosperity, or for that to be realistically on the way. And that means the floating voters need to feel easy about the value of their houses so they can feel comfortable spending again. So lets’ hope common sense prevails and we have seen the worst.

 

January 2012

IS THERE HOPE ?

Doom and gloom is everywhere. In the shops, in the housing market, in the job queues of the young, in the wars abroad, in the oil prices and the instabilities of the world both social and economic.

So is it time to give up and how do we do that if that is the decision? Well maybe it is not quite as bad as all that. Just maybe when the worst seems to be happening the bottom of the cycle is in sight. We seem to have already forgotten quite how bad the economic state of the economy was at the time of the last general election and the Coalition government always made it plain that it would hurt, getting out of that mess. They were not wrong!

So what is encouraging in the UK? The hold on interest rates, the tightening of Government spending (every house has to put their financial affairs in order) and the promise of tax cuts for starters.

House prices in strong parts of the country where location has always been a yard stick are holding their own and trading is taking place.

What about the other areas? Many many people want to move but are stuck without buyers for their own property. And why? Because the young cannot get mortgages from the banks.

Come on Mr Osbourne, either lend the deposit direct from the Government to first time buyers and take out a second mortgage or lean on your banking friends to release credit. We don’t mind which but help people to help themselves.

Then you might find they will help you.

BUDGET BONUS ?

It’s too early to say if the proposals coming out of the budget relating to housing are going to help. Anything to help the first time buyer is going to be good such as the Government’ s idea to help with the large deposit that banks are so busy enforcing. Will that really encourage buyers when that money will still have to be repaid at some stage and the value of this new investment could well drop? Buyers still have to do their research and take a view on that score.

Enabling more new houses to be built by easing planning laws for new builds and stamp duty for multiple apartments and change of use in some commercial properties to residential is all grist to the mill.

Sentiment cannot be overlooked and it is going to take time for the doom and gloom that has so dominated the scene (particularly if you are a vendor) to disappear.

But it’s a step in the right direction. Even better will be maintaining Bank of England interest rates at the current level and persuading the banks to get on and lend!

PARK HOMES - A BRIGHTER FUTURE

News that the Government is to change the law is good news for the occupiers of park homes. It will also lead to renewed interest in this form of housing.

Although the majority of the owners of park home sites are scrupulous in the handling of the homes, there have been enough bad stories from occupiers for the Government to want to tighten up the law. The point is that although occupiers may own the park home, the land on which it sits will probably belong to the whole site owner who provides the facilities.

Very often the problem lies with the fact that occupiers do not know their rights for example with the Local Authority. But at least this will make matters clearer for all.

Park Homes have been an intriguing and cheaper alternative to conventional housing particularly for the retired who want for example to take some equity out of their house and live in peaceful and pretty surroundings.

But as always research is crucial if you decide to go down this path.

Why Thais love the Brits

The Thai currency has been performing very well lately, with it expanding past 70 THB to the pound. In addition, the British property market is showing signs of recovery, which makes Thai buyers happy to invest there. This paired with trepidation over the future of the Thai property market and the economy as a whole makes London investment all the more attractive for wealthy Thais.

 

In order to understand the investment attraction of London properties, one must understand the potential Thai buyers. Typically, those Thais interested in making large purchases in the UK fall into one of the following categories:

 

  • Wealthy Thais looking for investment opportunities abroad with a more stable return on investment than the potentially fluctuating Thai market.

  • Wealthy Thais looking for a secondary residence outside Thailand. London properties offer the type of high society image that wealthy Thais are looking for.

  • Many Thais see great value in sending their children abroad for educational purposes. English schools are held in high regard by elite Thais, with the current prime minister having graduated from Oxford.

 

With these types of Thais actively looking for property investments abroad, property owners in London can expect to be selling units to Thai buyers this year.

 

In order to meet the demand from Thai investors, some new property companies have been targeting Thais specifically, often to good results. Sales just this year of properties in London to Thai buyers have topped 1 billion Thai baht in value. The high class firms which target the Thai market often hold private face-to-face meetings with potential buyers both in Thailand and in the UK. In addition, in order to generate broader attention, these property companies often hold exhibitions or take place in existing ones in Bangkok, the huge capital city of Thailand. Common locations for these events include Muang Thong Thani and BITEC, both large multi-purpose arenas with exhibition space.

 

The most popular types of property for Thai investors are two-bedroom condominiums, due to their affordable price and livability. In addition, many Thais are going to work in London, opening high-end restaurants and service-based locations. The Thai connection with London will likely increase in the coming years, as more companies take note of the purchasing power of Thai buyers.

OPTIMISM VERSUS REALITY IN 2011

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There is much to be gloomy about in the property market as we head in to a new year but much depends on the point from which you are looking. Rents continue to strengthen helping to shore up the buy to let investors and even December appeared to show a stronger housing market, at least making the statistics less ghastly than they might have been.

There is a shortage of houses in the country with an increasing size of population and potential demand. Coalition housing policies are likely to allow opposition from local people to stifle new housing schemes so applying yet more pressure on stock.

Even the banks are resolving the problems of their balance sheets as seen by the huge bonuses likely to be paid out. We need them to succeed in themselves and for them to see a stable property market on which they can rely.

But will it happen? I am optimistic that it will but not in 2011. Some will be fine. For example property in the right location has always been a good bet and indeed age groups who have a 40 % deposit and a reliable income will be very welcome at the bank.

There is however too much froth still in the system. Terraces in the north for example which were so beloved by the young are likely to achieve yet lower prices as those desperate to sell will undercut their neighbours with the bargain hunters still in short supply.

The banks do not like investing in these uncertain areas and the supply of mortgages is going to be in even shorter supply if they see their investment potentially folding. Coalition cuts will not help either and negative equity will make it very difficult to move to a job in another part of the Country.

But at some stage this will all turn. A bottom in the market will be found, prices can stop drifting downwards and as has happened in past housing crises normal service will resume. Be careful though - one boom is not like another and as ever the watchword is do your home work when you buy and work out why you are and the consequent risks you are taking.


HAPPY NEW YEAR!

OPPORTUNITY KNOCKS

It looks as if rental demand is strong again as increasing numbers of people are unable to find the deposit to buy a house. The banks continue to make it as difficult as possible for the young to get on to the step ladder of home ownership so there is little alternative for them to do other than rent.

However as a result it is looking as if current house prices can sustain a yield well in excess of savings in those banks themselves, so the buy to let market is still considered viable. Indeed the relatively small amount of property coming on the market could well prevent a further large fall in prices if buyers continue to have confidence in the investment at that level.

Many people think there are still dramatic falls likely in the value of houses but if investors pile in at returns so much higher than you can receive from a bank/building savings account, you have to wonder if that will really happen.

Until the banks release cash and take into account those of us who just want to make a living and make our way through life with an owned house in a traditional way , how can all this change?

What I wonder now, when everything in the property market is so flat and knowing how we instinctively want to own our own house- our castle you might say, is this our opportunity to buy- it is your call!

Latest house data shows negative trend

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The October data from Land Registry's House Price Index shows an annual price increase of 3.4% which takes the average property value in England and Wales to £165,505. However, the figure is also the fifth month in a row in which annual growth has fallen.

Eight regions in England and Wales experienced an increase in their average property values over the last 12 months. The region with the highest annual price change is London with an increase of 7.6 per cent taking the average price in the capital to £341,105.

So what does this mean? Concerns over household income and job security appears to be causing an aversion to moving home. If you have little room for financial manoeuvre you could find yourself trapped in your mortgage. And would-be first time buyers have little chance of raising a sufficient deposit to obtain a mortgage. Added to this, the Financial Services Authority's warning that it will require stricter assessments of mortgage applicants. All these factors add up, and could prove very negative for house prices in the upcoming years.

SELLERS CLOUD – BUYERS CHANCE

It’s becoming clearer that the housing market has a long way to go before sellers are going to be in a strong position again unless you are selling something very special. Unfortunately there is not a lot of good news for them this Autumn.

So what influences are coming to bear? Firstly the continuous barrage of unsettling views on interest rates which seem almost designed to talk the economy down rather than provide helpful guidelines. Ie when will interest rates go up and when they do to what level?

Secondly, the banks’ disinclination to lend mortgages without a large deposit is cutting out swathes of buyers who would have been there a few years ago.

A build up in the number of houses available to buy is becoming apparent. That in itself could be good but the public spending cuts are emphasizing the north/ south Country divide to such an extent that the demand for houses in the North is affected, creating even greater uncertainty.

Valuers are very thoughtful when writing their reports for a mortgage company. Comparable sales are important for the protection of their backs, as they can be sued when a repossession takes place. There could well be sales used as comparables where sellers feel that they have to sell and if these are agreed at below the going rate for one reason or another you can see a downward spiral happening.

Even the Coalition’s ideas on education could affect values. For example housing in the catchment areas of popular schools may not continue to have that element of extra value if the rules change. Indeed the new ‘free schools’ may not be in those traditional areas at all so will prices increase ?

These are uncertain times for us all and who knows how the economic situation is going to turn out when there is so much disagreement among even the forecasters themselves. However if you have the cash, now could well be a very good opportunity. There’s a silver lining for someone somewhere in all this!

INTEREST RATE SAGA

Forecasters still do not agree as to where interest rates will be over the next few years. There are extremes of an 8 per cent Bank base rate in 2012 being talked about down to zero if the economic situation becomes dire. Will either of these two scenarios happen?

It’s not helped by the Bank of England creating a new model for assessing their thinking thereby admitting they were wrong in the first place. At least that is out of the way and we can all move on but it is very unsettling and you do wonder if they really are on the right course now.

Much of it is going to depend on the banks themselves. While credit is difficult to get hold of to keep a business going and indeed expand it, there will be little economic recovery. Getting the cash moving round everyone will bring back confidence but is going to lead to a potential increase in inflation.

Cutting public spending will balance that and the Coalition Government are taking brave decisions to enable the recovery to jump to the next step without increasing inflation. The concern has to be this winter and next year whether there will be such a backlash from the unions that strikes will set the recovery back and that is the worst scenario - Country chaos.

When we take out a mortgage or loan we are all individually making a bet. So my advice is do your homework and try to understand the bigger picture. Whatever the mistakes of the past whether from the banks themselves as well as the Bank of England, you can be sure lessons have been learnt and it is in the interests of our economic masters not to destroy our prosperity a second time. Unfortunately we need them as well as their needing us.

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