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Mortgage lending continues to decline amidst falling home values

[ Posted November 19th, 2011 ]

Houses prices drop by a stunning £65 per day during the month of August

[ Posted September 16th, 2011 ]

For those who thought that mortgage rates and house prices could not fall any lower than they already have, August proved them wrong as the rates continue to fall due to the competitive banking industry and house prices fell by a stunning £65 per day on average during the same month.  This represents a 1.2% fall since last April according to a new report from Britain’s primary mortgage lender Halifax.  The drop left the new average house price at £161,700 which is shocking compared to the slight gains that the housing market managed to make over the last two months.

Not only is this drop stunning for the six month period, but when compared to the levels seen just a year ago it is a drastic 2.6% or £6,600 less meaning that home owners may be losing equity instead of actually coming out ahead in today’s mortgage market.  While the news of calling home prices may make landlords happy that are shopping for great buy to let mortgage rates and great investments, for the average home owner with established equity this is not a great place to be sitting.  This is especially true if they are considering remortgaging their home.

Chief economist for Halifax, Martin Ellis, stated that he thought the housing slump may have been caused a bit by the small amount of homes that actually changed hands pointing to the fact that remortgages were much more popular over the last six months as home owners sought out better fixed mortgagesHe also stated that over the past three months house prices still performed better by about a percent when compared to the previous quarter of the year pointing to some light at the end of the tunnel.

Ellis added that he also thought house prices would begin to level off over the coming months aided by the shocking reductions that many companies have made in their mortgage rates.  He added that the reductions will make it much more affordable for homeowners that can get a deposit together to consider purchasing a new home.  His advice sharply contrasts with other less hopeful analysts such as Global Insight chief economist Howard Archer who believes that house prices may drop another five percent before the end of the year comes due to unemployment, spending cuts by the government, and stagnant salaries.

Lower Risk Areas Attracting Developers

[ Posted September 26th, 2010 ]

Lower risk development sites are beginning to prove more and more attractive to local and global property developers alike, with companies shifting more focus to rural areas than previously seen before and helping to improve supply in more urban settings. As this occurs greater availability of many lower priced housing is expected to be seen throughout the UK property market as a whole, though whether or not this will be enough to encourage many first-time buyers to take the plunge into the current unsteady real estate sector is still in question.

A primary concern for the majority of new buyers and current property holders alike is that, regardless of whatever low-risk housing may be available, individuals may not be able to secure any decent tracker or fixed-rate mortgages in the foreseeable future without considerable liquid funds at their disposal to do so. While it is true that lower priced properties in areas posing lower risk of price fluctuations will allow a larger number of individuals to enter into the market at the same time increasing mortgage regulations continue to make it more difficult to join in an already over-saturated economic sector – even with the continued Stamp Duty holiday for first-time purchasers looking to secure a low enough priced home.

While many individuals are content to sit and wait out another economic turn as well as greater market stability many fear that this is not going to be realizable in the short term and as such virtually an entire generation may be deprived of the right of owning their own home until their latter years of life. This in turn aids to stimulating the lettings market as more individuals and couples turn to a more affordable option for lodging yet at the same time fears of this generating an over abundance of demand for rooms or entire homes for rent could work against those seeking more affordable housing options as well.

Foreign Investment Gaining Attention

[ Posted September 19th, 2010 ]

As house prices begin to fall once more throughout the UK and individuals are worrying over the possible profitability of their homes more and more are turning to foreign countries for purchases – with sights set particularly on areas such as Spain, France, Portugal and even the US. While it is true that overseas mortgages, like all other mortgages, have become somewhat more difficult to obtain as of late the overall level of potential profitability makes the push for them much more appealing in many ways to some people than domestic versions. This goes the same for residential and commercial property alike, especially given recent trends in more rural areas outside of London.

While in the past areas such as France or Spain have been given primary interest due to their relative proximity to the UK and ease of travel between the two countries recently the US has worked to engender more and more interest from various individuals. This is particularly true for many "real estate turners" that operate by purchasing poor-quality homes for extremely low values, fixing them and then selling them once more on the market for a substantial profit. Some foreclosed homes throughout the US currently, for example, can be purchased for as little as $2000 USD and once repaired sold for as much as $60,000 USD (with generally $30,000 USD required for repairs and other costs associated with the endeavor).

This potential for high profitability in numerous areas has attracted many developers from domestic and international organizations alike, with even some first-time buyers looking at investing in foreign real estate over property in local markets simply due to the fact that domestic property is both on the decline and generally considered too highly priced to fit into most people’s price ranges. Even those with bad credit can attain funding for the purchase of some more affordable property overseas – something that may simply be a dream for many looking solely at the local property market.

House Prices Speeding Up Decline

[ Posted September 15th, 2010 ]

The Royal Institute of Chartered Surveyors’ latest reports indicate that the property market has begun its full-throttled push into declining numbers, with 32% new estate agents reporting that house prices have fallen rather than risen in August. This, coupled with the fact that the number of first-time buyers looking at purchasing homes recently is at an all-time low, is working to generate growing unease and uncertainty about the condition of the market going into 2011.

Old news to many by now, the growing number of first-time buyers unable to purchase homes despite the low interest rates still maintained by the central banks and other favourable fixed-rate mortgage options being available on the market – provided you are able to make a sizeable enough down payment – has had a lasting impact upon much of the real estate market as a whole. This has also worked to push down the overall value of homes in the lower end of the market, boding ill for many current property owners concerned about the overall value of their land.

The recent difficulties faced in obtaining funding by many people has actually worked against a large number of home owners throughout the country, with current over-supply in the market seen as contributing strongly to the price declines. In fact, recent RICS reports show that home owners are now forced to reduce the asking price of their homes by up to 10% in order to secure a sale, with many times this not even being enough to close some deals.

Many experts anticipate the situation to become more strained going into the latter months of the year, however at the same time optimism is being kept up for next spring when traditional market trends should help encourage another recovery as was seen earlier this year.

Lettings Market Faced with Lack of Supply Issues

[ Posted August 28th, 2010 ]

Latest reports from chartered surveyors around the country indicate that the buy-to-let market throughout the country is gearing up for a long-term all time high as more and more people turn to renting rather than purchasing a home and the demand for property far outstretches the actual supply available. This is causing a progressive rise in rents being collected for the second straight quarter in a row according to the Royal Institute of Chartered Surveyors (RICS), with little progress being seen looking towards the coming few months to indicate a slowing of the pace.

One of the primary limiting factors that has worked to stymie the market has been that regardless of the fact that mortgage rates remain at an all-time low the lettings market for all mortgages ranging from commercial mortgages to even highly sought after buy-to-let mortgages remain low. This is due to a number of factors, including lender uncertainties over the actual viability of some properties to high initial down-payment rates preventing many additional developments to be established throughout the country that would help alleviate many of the supply issues in some areas.

Experts expect that the current trends limiting the overall expansion of the buy-to-let market will continue throughout the remainder of the year as more and more people shift their attention away from individual home purchases and towards renting as a way to save up money for purchases of their own later on down the road. The fact that many feel the UK will follow the US property market in its progressive decline and work to drive down home costs in the future adds to this anticipation and fewer and fewer people are willing to purchase homes for fear they will decrease in value while lending institutions grow more weary each day over potentially unprofitable ventures.

Development land shows clear north-south divide in UK

[ Posted August 8th, 2010 ]

According to the latest research from the property adviser, Savills, the competition for developable land has begun to impact positively in development values, affecting housing and mortgage markets alike. There appears still to be, however, a gap between small sites in housing markets that are in high demand. Conversely, the higher costs that come with larger sites in terms of both preparation and promotional aspects is continuing to impact negatively in value growth, with many sites still being curtailed and others remaining impossible to sell, the research shows.

Some developers across the country have re-captitalised, and are creating competition for small, so-called ‘easy sites’ by seeking land in areas with definite housing shortages. Prices have been pushed up by the rarity aspect of sites in prime locations, with prices in certain areas currently within 20% of their levels at 2007’s peak, according to the research.

Modest growth has been seen in the average value of residential development land during the past three months. The values of greenfield sites climbed by an average of 3.2%, with urban land values climbing by 3.8%. The rises saw annual growth stand at 16.6% and 14.1% respectively.

‘Average growth figures disguise huge variations and need to be treated with some caution. The development land market is now polarised on virtually every level: between North and South; high and low value housing markets; large, infrastructure-hungry sites and small easy to develop de-risked sites,’ according to Yolande Barnes, the head of Savills residential research. This is especially true for many places that were once considered risky due to high levels of bad credit mortgages or others with less desirable fixed mortgage rates.

‘More than ever, those in the market need to evaluate sites on a case by case basis, since the value of each site and, ultimately, its ability to generate revenue, will be determined by regional and, in many cases, highly localised factors,’ Ms Barnes added.

According to the research, the divide between the north and the south has become more marked, and more definite. The value of greenfield sites in the south-east are growing at the fastest rate, and currently stand only 37% below their peak levels of 2007. This has largely been as a result of the strong demand for ready-to-build greenfield sites. Ms Barnes commented that the figures reflect the burgeoning confidence of developers based on the residential market’s in-built strength as well as a definite shortage of available land. Conversely, the value of urban, brownfield sites in the north of the country has continued their decline, falling -2.2% for the quarter, and now 71% below peak levels. ‘Such sites require promotional capital beyond the means of a fundamentally cautious and under capitalised market. Urban land values, particularly the larger sites, therefore continue to languish,’  according to Ms Barnes.

Housing in North Belfast get huge 38m Euro injection

[ Posted July 29th, 2010 ]

Plans have been recently announced by the social development minister, Margaret Ritchie, to make an investment of 38 million Euros in brand new housing in North Belfast. The large investment will go towards ensuring that the majority of the old, inadequate and run-down housing currently in the area will be pulled down in order to make space for newly-built, fully modern family homes in the Parkside, Upper Long Streets and Queen Victoria Gardens areas.

Coming towards the end of her term in office, Margaret Ritchie spoke of her pleasure in fulfilling a promise she made earlier in her term as social development minister: “I have visited each of these areas and seen at first hand the poor housing people were living in. I made a promise to the residents in each community I visited that they would not be forgotten, and I am pleased that in my last days as Minister, I can now make good that promise,” she said.

In total, 276 old terraced houses will be pulled down in North Belfast, and all work will be carried out in full consultation with the local community.

The minister further added: “I made it clear when I launched the New Housing Agenda that I wanted to increase both the quantity and quality of our housing. When I launched the redevelopment of the Village I said North Belfast was the next priority. North Belfast is an area of high housing need and this investment will make a significant difference to the lives of so many people living in these communities.”

The Housing Executive will soon begin a period of consultation with each affected local community in order to discuss and then reach agreement on implementation plans for every area. Although the work will be gradually phased-in during the coming years, Minister Ritchie has made available the necessary funding for work to begin immediately on the new homes to support both existing home owners looking to downsize, encourage further overseas investment and at the same time allow greater opportunity for first-time buyers. She spoke further of her belief in the importance of the scheme and that it was the right decision to have ring-fenced the funding for the project after past disappointments. “Despite financial pressures, we are delivering on all aspects of the New Housing Agenda,” she concluded.

Budget measures set to precipitate house price crash by 2012

[ Posted July 28th, 2010 ]

According to one of the country’s foremost economic forecasters, house prices are set to drop by more than 20% during the course of the next two year, caused by a combination of imposed government spending cuts, a sharp spike in unemployment and tax rises.

Capital Economics, which is a consultancy firm headed by Roger Bootle, has anticipated that house prices will drop by 5% over the course of 2010, followed by falls of 10% in both 2011 and 2012. The group has predicted a total fall in house prices of 23% from the beginning of 2010, which represents a far more substantial fall than the crash of 19.3% experienced during the recession.  The numbers from Capital indicate that the second half of 2010 could see house prices coming in for a very difficult time as house prices are at the moment 3% higher than at the beginning of the year according to the Nationwide Building Society. The figures from the Nationwide map those from Capital Economics.

"Higher taxes, spending cuts and rising unemployment all point to fresh house price falls this year and next," the forecasters stated in a report. "The benefits of low interest rates for tracker, fixed-rate and even bad-credit mortgages will be undermined by a fresh tightening in mortgage lending criteria."

This comes as the second report in under a week that makes depressing reading for homeowners in the UK. Further to this, PriceWaterhouseCoopers issued a similarly portentious warning: "There is a 70pc chance that UK house prices will still be below peak 2007 levels in 2015 in real terms … and that real house prices [after inflation] may not regain their previous peak levels until around 2020".

Average house prices hit their peak of roughly £187,000 in October 2007, and then crashed for 16 consecutive months, according to figures from Nationwide. The recent recovery has left the average house price standing at £170,111, a figure 9% lower than at the apex of the boom period. Capital Economics underscored their rather gloomy outlook by indicating that the house price-to-earnings ratio still stands far higher than its 4% long-run average at 5.5%. They also stress that mortgage rates are only likely to get more expensive still. They anticipate that London will be “hardest hit by the second leg of the correction.” The firm also went on to caution, however, that the forecast for 2012 is “highly uncertain.”

Their outlook is principally founded on a far worse economic outlook than has been postulated by the treasury. Capital Economics have forecast that the economy will grow by only 1% in 2010, 1.5% in 2011 and 2% in 2012, as opposed to the treasury’s figures of 1.2%, 2.3% and 2.8%, respectively.

Government Dept indicates that UK house prices still rising

[ Posted July 24th, 2010 ]

According to the very latest property price index produced by the UK government, house price values continued to rise during May, which seems to suggest that the housing market, despite the fact that it is slowing, is still performing better than has been suggested in other market reports.

The UK House Price Index is published by the Department of Communities and Local Government, and it incorporates data which is based upon mortgage completions during May of this year, and the Index itself indicates that house prices rose by 0.7% during May, and are also 11% higher as compared to the same month last year – particularly good news for first-time buyers concerned over the sustainable value of a newly purchased property.

The latest government index seems to be rather out of step with other recently published reports, although this could be due to the fact that each report will be calculated on a different basis.

The latest index does, however, contribute to the mounting uncertainty as to the condition of both the commercial and residential property markets, and this view was espouses by Simon Rubinsohn, who is chief economist at the Royal Institution of Chartered Surveyors. Mr Rubinsohn stated that May’s 0.7% increase is certainly a stronger rise than was indicated by the Nationwide Building Society for the same month, and that the report also contradicts the falls shown in reports published by both the Halifax and the Land Registry.

 ‘This divergence in part reflects the fact that the indices are gathering price data at different points in the house purchase process. However, relatively low transaction volumes may also be adding to the volatility of the individual series,’ said Rubinsohn.
‘The regional dimension is likely to remain significant, however. Price expectations are still positive in London, the South East, Scotland and the East Midlands but strongly negative in Wales, East Anglia and much of Northern England,’ he concluded.

The average house price Index for the UK-which is mid-adjusted-reached £209,505 during May of this year, and the figures rose on a quarterly basis by 1.7% for the quarter, which compares with a 2.9% rise for the quarter that ended in February of this year.

In overall terms, average house prices climbed 11.7% in England, by 3.7% in Scotland and by 10.9% in Wales. Despite this overall trend, the figure dropped by 1.1% in Northern Ireland. As compared to a year ago, the average annual prices paid by first-time buyers in May 2010 stood 11.6% higher than at the same time last year; and average prices paid by former owner-occupiers stood 10.8% higher.

The report also indicated that average prices paid for new properties throughout May 2010 were 6.5% higher than at the same time last year, and the average prices for pre-owned houses were 11.3% higher. aims to provide every client with cheap, affordable and best mortgage loans in the UK market, however the actual mortgage rate available will depend on client's financial circumstances and credit history. Although, has made every effort to ensure that the mortgage rates listed are correct, it bears no responsibility in case of an error. 
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