The latest property index has shown that a larger number of properties available for sale resulted in UK residential real estate prices dropping unexpectedly in February by 1.5%, which represents the first drop since June, 2009. This drop follows on from a revised 0.4% rise in January, and resulted in prices being 4.5% up in the three month period to February, as compared with the same period last year, according to Halifax’s index.

The Halifax index also goes on to state that a variety of factors, such as inclement weather, increased supply, and the end of the tax holiday enjoyed by some house buyers all played their part in contributing to the drop in prices. Despite this, however, the report pointed out that property prices still remained 8% higher than in April 2009.

Martin Ellis, housing economist at Halifax, said that the increase in properties available for sale has aided in the reduction of the supply and demand imbalance. He went on to state that the poor weather seen in the UK during January and February-coupled with a low stamp duty threshold of £125,000-combined to adversely affect housing demand. According to Halifax, as of February 2010, the average house price in the UK stood at £166,587.

Halifax’s index is just the latest in a range of figures and reports indicating a slowdown in the UK housing and property market. The Nationwide Building Society also detailed a 1% drop in housing prices in February, and, along with this, the Bank of England also indicated that mortgage approvals dropped to an eight-month nadir in January.

Despite this cooling indicators, however, Hometrack recorded a 0.3% climb in house prices in February as compared to January. Added to this, regions such as London and the south east defy all cooling, and simply continue to climb. Hometrack’s figures also indicate that, in February, the housing market also saw the first Y-O-Y rise since March 2008. These figures stood at 0.4%, with house prices themselves rising across a quarter of all UK postcodes, something not seen for over two years.

Many analysts warn, however, that the housing and real estate markets in the UK lack genuine stability and solid foundations.  To underscore this, the number of agreed sales rose by only 10% in February, as compared to an average of 30% in past years. In combination with this, supply rose by just 4.6% as compared to an average previous yearly rise of 14%. Also, buyer registrations rose by just 8.3% as compared to an average rise of 24% for the same month over a consistent previous eight year period. This may be due to the fact that fewer first-time buyers are currently entering into the market due to economic difficulties and fewer bad credit mortgages are being issued as well due to changes in lender decisions.

A new report has shown that the property lending market in Scotland has begun to recover, albeit at a slower rate than has been seen in the lending market for the UK in general. The report released by the Council of Mortgage Lenders illustrated that house-buying activity continued its recovery during the last three months of last year, showing that there were 14,200 loans granted for house buying purposes in the fourth quarter of 2009. This represents a rise of 4% by number and 5% in terms of value on the figures of the preceding three month period.

The report by the CML also indicated that general growth in Scotland’s housing market was slightly down on that seen in the UK as a whole, with Scotland seeing a 9% rise in house-buying activity in the final quarter of 2009 as well as a 62% YOY rise. The increase seen in Scotland from the final three months of 2008 was 22% by volume and 19% by value, which goes to show the extent to which the market in Scotland recovered during 2009 from its low point in the first quarter of 2008 when figures of 7,600 loans with a total value of £785 million were seen according to the Council for Mortgage Lenders.

Due to the slower market upswing Scotland’s portion of all house-buying loans fell to just 8% for the quarter, which represents the lowest market share for almost three years. The 9% share for 2009 overall was don from 2008’s high point figure of 12%.

Scotland’s number of first-time buyers remained unchanged, standing at 5,400 in the fourth quarter. However, the value of lending to first-time buyers rose during the finals three month period-from £475 million to £479 million, with the number of loans also rising from 4,100-at a value of £368 million, YOY. Re-mortgaging volumes have stayed low in Scotland, however, and this is very much in concert with what is happening in the rest of the UK.

Scotland saw 9,000 loans for re-mortgaging totalling £900 million for the fourth quarter, a figure down from 10,000 loans totalling £1 billion over the preceding three months. In 2009 as a whole, Scotland saw 39,000 in total worth £4.4 billion for the purposes of re-mortgaging, figures down from 74,000 worth £7.4 billion in 2008. Just like in the UK as a whole, a lot of Scottish borrowers  are still likely to have difficulties obtaining the more alluring new deals and top mortgage rates which tend to only be on offer to people capable of putting down larger deposits, according to the report.

A Royal Institution of Chartered Surveyors working group has claimed that the UK property industry contains definite transparency gaps with regards to the professional fees charged, and that thorough regulation is required in the real estate sector in the UK. The RICS working group also discovered a number of examples of bad practise as well as inconsistencies in the level of openness regarding the professional fees charged within the industry. The report says that, as a result, customers in the real estate market end up being unaware of what exactly the are paying for when they purchase services.

The RICS has called upon the government to launch a review in order to significantly improve industry regulations, as the report details that consumers in the real estate sector want a clear and detailed breakdown of all professional fees charged, including commission earned, as well as all relevant information necessary in order for them to make fully informed decisions and choices. The President of the RICS and Chairman of their Working Transparency Group, Max Crofts, stated that the group has witnessed a change in the banking world whilst working on the report. He said that the current focus was on ’sensible lending, transparency and proper risk management.’ He went on to say that the consultation had served to highlight the good and bad of how the property market operates, although he claimed that current solutions were ‘piecemeal, at best’.

He concluded that the consultation provided an excellent chance for those in the industry to work together in order to build on existing good practise, as well as to eradicate the more unwelcome practices in the sector to improve regulation and standard and increase customer protection. ‘Greater regulation is needed from government’, he said.

The main recommendations of the consultation point towards the need for landlords, managing and letting agents to be subject to appropriate legislation so that sufficient customer protection and market efficiency and consistency can be ensured.

The RICS also recommended that industry regulation should be undertaken by an independent body that would approve and enforce the agreed standards and codes of industry practise. It stated that this should be backed up with government legislation giving the body sufficient authority to ensure compliance throughout the industry, as well as providing a review of current legislation within the residential sector.

Finally the RICS is convinced that the industry as a whole must ensure that consumer clients are aware of the exact payments made, including remuneration, commission and insurance.

Should proper regulation not be focused on this may greatly impact many home owners and potential home owners alike, possible preventing them for getting the best value possible for a home on their mortgage as well as prevent many first-time buyers from acquiring a good home or even directly affecting re-mortgage value.

A new report released by Britain’s Office of Fair Trading has stated that house buyers and sellers are in desperate need of an alternative to the traditional estate agent market model in order that they receive overall better value. The report goes on to say that actual price competition between estate agents is not especially strong, and that rises in agent fees and commission rates typically happens during property boom whilst it tends to drop again when the market contracts.

The year-long study by the OFT also showed that the internet has also revolutionised how people look for new homes, but they also found that Internet portals also remained dominated by the traditional estate agents. The OFT went on to suggest that innovation in respect of Internet services could have a huge impact on just how much it costs to buy and sell a home to the benefit of both buyer and seller. The report further stated that current legislation should be brought up to date in order that alternatives to the traditional estate agent models could be better fitted into the market so that the market in general is as malleable as it can be to new models.

The report also exhorts policy-makers to investigate methods of coming down on possible conflicts of interest in the property-buying market – especially with regard to payments for such related services as conveyanving and mortgage advice and weighs in heavily to criticise the introduction fees that estate agents pay to other companies for introducing business to them. The OFT’s report has suggested that such fee could even be banned. It does not, however, press the case for extra regulating, stating that existing laws that date back to 1979 work perfectly well. They also argued that a licensing system was unnecessary.

John Fingleton, the OFT’s chief executive, stated that the encouragement of new ways of doing business within the sector such as online estate agents and private vendor platforms could well result in positive pressure being applied to traditional models and ways of buying and selling houses, helping those seeking homes to lock in the best mortgage rates possible, and might end in improved value for both buyers and sellers – particularly for first-time buyers and those seeking valued re-mortgages.

One of the UK’s leading housebuilders, Redrow, has pledged to return to building traditional homes including garages and gardens rather than what it refers to as ‘the Stalingrad-style apartments’ that have sprung up in recent years. The company has said that it plans to focus on building properties that have simple, decent and functional design, saying that people want a return to such housing.

Redrow has recently launched its  new range of homes called ‘Heritage’-based on the early 1900s arts and crafts movement.  Top Redrow executives came to the conclusion that people had ceased purchasing newly-built homes, and they felt that action was necessary. There was a genuine feeling that home-buyers desired a return to more traditional housing values. The company has also been somewhat dismayed at the insistence of planning regulators of encouraging apartment developments.

Redrow’s Heritage Collection showcases 34 different home designs, all featuring traditional exterior features like garages and gardens. Company bosses have said that they fully anticipate the new collection, featuring period-style properties, to account for some 80% of the company’s output within the next two years.

Redrow’s desire to instigate the new collection rapidly has been curtailed due to a land shortage as well as the lack of offerings in the mortgage market. These factors, along with planning policy, are halting construction as well as turning away possible purchasers. The planning process in particular has been slammed for its lengthy red-tape approach as well as contributing to the UK’s lack of housing stock. 

At the apex of the last housing boom Redrow was outputting some 5,000 homes, as compared to only 2,100 last year.  Its new plans include opening ten new show complexes by May 2010, with prices ranging from £110,000 to 600,000. It is hoped that this will significantly increase the average selling price of the group. The group forecasts that, although the upcoming year is likely to be a tough one for the housing market and the house building industry, a double-dip recession is unlikely in the UK. This will hopefully encourage many more first time buyers to invest in the new home style as well as help ensure good fixed rate mortgage offerings into the coming months.

Recently released figures have shown that, despite the fact that more UK homeowners faced more home repossessions in 2009 than in any year since 2005, the figures were still lower than had been previously feared. In total around 46,000 homes were repossessed, which represents a rise of 6,000 on figures seen in 2008. The figure was still lower than the recent forecast of 48,000 as well as being far less than the figure forecast at the start of 2009 which was 75,000. The figures were released by the Council of Mortgage Lenders.

With regards to mortgage repayment problems some 188,000 mortgages finished 2009 in arrears equivalent to around 2.5% of their outstanding balance – a figure that is lower than had been feared by the Council of Mortgage Lenders, who had suspected the figure would reach 195,000. It was also some 3% lower than the figure at the end of the third quarter.

The Council stated that those borrowers that were in only moderate difficulties with repayments have been greatly aided by the continuing low interest rates that have enabled them to navigate the tough market conditions, particularly those who have been able to lock-in a good fixed rate mortgage to provide some good stability over the past few months as well as the coming year. In contrast, borrowers facing bigger problems with their mortgage repayments have merely been able to use the current market conditions to bring some stability to their situations without being able to fully recover. Perhaps the leading factor enabling home owners to avoid repossession is lender forbearance.

As it looks forward the Council of Mortgage Lenders predicts that 2010 will see around 205,000 cases of arrears as well as 53,000 homes being repossessed. Some analysts feel, however, that certain economic conditions and indicators make these predictions seem somewhat pessimistic – in particular factors such as the continuing historically low interest rates, government assistance schemes and the fact that unemployment has not been as big a problem as had been feared. Due to this combination of factors many borrowers are able to navigate these turbulent times, though at the same time despite these factors economic and political forecasts remain largely uncertain with many experts predicting that interest rates are likely to rise sooner rather than later. Many feel that this will result in 2010 being a very challenging year for mortgage holders, particularly for those who have been reliant upon bad credit mortgages in the past, who will most likely face a further squeeze on their finances.

The office market of central London could soon be looking at record-breaking double-digit growth in the rental market in the commercial property sector throughout the coming year according to analysts. The principal reason for such optimism is the return of occupier growth led by expansion, which is the result of the recent upturn seen in both the financial markets and global trade.  Property consultants, Frank Knight, also believe that low levels of speculative development will most likely result in a dramatic fall in levels of availability during the coming two years thank in no small part to the number of favourable mortgage rates currently on the market to help stimulate the sector.

Property market analysts also speculate that a growing number of institutional property funds are likely to be buoyed by the prospect of investing in the coming year, and many also feel that a recovery in property prices will most likely be sustainable due to the fact that market activity has been in line with that seen in past cycles. It has also been forecast that prime rents in the City of London are set to see an increase of 19% in the coming year, rising to just under £53 per square foot from the 2009 level of £44. The price rise is principally a result of the shortage of top-quality office space as well as more buoyant demand from tenants. Over the coming five year period it is speculated that rents per square foot will go up to £67 towards 2014, which represents a five-year rise of 52%.

Analysts believe that as a result of far lower levels of new developments in London over the previous two years they feel that supply will be significantly squeezed over the coming two years, with some predicting a supply crunch for 2011 – particularly if foreign banks offering overseas mortgages for investment in England remain strong in the future. Rents in the London West End market are expected to record a record growth figure of 11.5% for 2010, rising to just under £73 per square foot, which is up from last year’s figure of £65, also a result of a limited number of new development schemes. It is felt that there is likely to be much higher demand for office space from specialist find managers in the coming year as a result of recent improvements in the financial markets, and this also would contribute to eh expected supply crunch, as the amount of speculative space current under construction for 2010 stands at a meagre 106,000 square feet.

According to the latest figures from UK property firm, Rightmove, asking pricess for residential properties rose by an unprecedented 3.2%, with many industry experts forecasting that the mini-boom will not continue. House prices in the UK now stand 6.1% up on the same period for last year, after January saw the largest monthly rise since April 2007. Asking prices in London rise 5% to reach the record figure of £427,987, which represents a higher mark than was recorded at the apex of 2007’s property boom following a total 10.3% increase during the past year.

Analysts, however, strongly believe that such rapid increases are unsustainable due to the scarcity of home purchase finance availability post credit crunch, and there are fears that estate agents have been merely acquiescing to the demands of sellers instead of allowing properties to enter the market at reasonable prices. Some feel that current market conditions are reminiscent of the 1970s and 1980s when  mortgage rationing was rife rather than reflecting the more recent periods of freely-available mortgages for those with even bad credit or looking to get a fair-valued re-mortgages.

There is also the growing feeling that further prices increases on the current scale cannot be supported by underlying economic principles, and the creeping suspicion is that agent s have gone along with sellers estimates of their property values merely in order to procure business.  Indeed, the price leap of more than 3% is synonymous with the pre-credit crunch boom time, with sellers prices their properties high and agents agreeing in order to patch over scare business in difficult times. The number of home entering the sales market has also begin to rise, with Rightmove listing 90,000 new properties in January, a figure up almost 20% on the same period in 2009. It must be stated, however, that the figures released at that time were somewhat obfuscated by the fact that properties could not be marketed until the seller of the property was in possession of a Home Information Pack.

Despite the current improvements seen new property listings on the market are still 37% below the levels seen for the month of January between 2005 and 2008. There also remains a real supply shortage in certain areas with levels of stock some 43% lower in East Anglia now than in the period between 2005 and 2008.

According to new figures released by the Council of Mortgage Lenders new lending for buy-to-lets rose for the second quarter in a row during the final three months of last year in the UK. The figures show that 25,800 new loans were granted in the fourth quarter, the figure being a rise of almost 2,000 on the third quarter figures. It was, however, a drop on 2008’s fourth quarter figures of 38,000. The Council stated that growth volumes have stayed comparatively low, and that the growth seen throughout 2009 was from an extremely low starting point after a gradual fall seen in seven consecutive quarters. The total number of loans saw a drop of 58% on 2008 figures, and last year witnessed the lowest total annual volume since 2001.

Buy-to-let lending increased across the board during the final three months of last year, but they were still advanced at roughly twice the frequency of loans for re-mortgage. The market conditions – particularly ongoing historically low interest rate levels leading to excellent mortgage rates – have greatly served those borrowers looking to buy-to-let, principally due to the fact that most of these mortgages are interest only. Such agreements particularly favour borrowers in arrears as they are able to recover from short-term problems or voided rental payments from tenants. There were fewer buy-to-let properties re-possessed in the final quarter of 2009, with the figure falling by a quarter from the previous quarter. The figure, however saw a rise from the fourth quarter of 2008.

Analysts are optimistic about the new figures and suggest that they signify the continuing improvement in the buy-to-let market, despite the fact that the improvements are somewhat slow, and that the market remains significantly down on past levels. There is also a certain amount of concern that any future market regulation might curtail any continuing buy-to-let activity from providing the market with not only good quality housing but also a scope of choice for those either unable to afford outright home ownership or not able to meet the criteria necessary to qualify for social housing schemes, particularly for those who have been having bad credit problems in the past due to the recession.

Newly released figures from the Council of Mortgage Lenders have shown that the number of first-time buyers reached a two-year peak in December 2009, sparked principally by the rush among new home-buyers to purchase before the end of the stamp duty holiday at the end of the month. The end of December saw stamp duty apply once more for houses valued between £125,000 and £175,000. However, with the average advance standing at £107,496, standing £5,300 higher than in November, the subsequent rise in the cost of acquired properties was far in excess of the minimum tax saving of £1,750.

For first-time buyers, the average deposit stayed at stable levels-at 25% from November to December 2009. This figure indicates that house-buyers either purchased more expensive properties or else they merely paid more for the same house. The new statistics appear to support what many mortgage brokers and lenders had been reporting – namely that the number of first-time buyers increased significantly towards the end of 2009 as they strove to get in ahead of the holiday deadline in addition to capitalize upon the historically low mortgage rates. The fact that this sudden increased demand was not supported by an increase in the number of properties for sale meant that there were more buyers looking for properties meaning that the value of first-time houses rose. Those buyers coming into the market after the end of the stamp duty holiday would have faced an extra 1% on the purchase price added to overall transaction costs.

Whilst the average mortgage advance lent to first-time buyers climbed by £10,000 throughout 2009, the deposits put down on houses stayed constant at 25%. As a result, buyers were required to save an additional £3,215 in December in order to purchase a property as compared to the beginning of 2009. Industry analysts suggest that the sudden rush and concomitant figures merely painted a false picture of the market and wider economy, and that affordability measures based on them are far from accurate as the majority of mortgages contain a repayment element instead of merely repaying the interest – particularly for those bad credit mortgages that may have been offered.