My father was an estate agent and auctioneer and therefore I have been connected to the housing market for most of my life. I have been through numerous recessions affecting the housing market but none as deep and as drawn out as this one.
With hindsight, the first signs were the cooling off of the market around mid-2007 followed by the banking crisis in 2008 which brought about the demise of the Northern Rock and Lehman Brothers banks. From that point onwards it was like a “pack of cards” as each bank had to be bailed out by the Government. As a result, lenders have had to build up their reserves and consequently have not had the funds or inclination to lend. Businesses and the housing market have suffered as a result.
First Time Buyers
The first time buyer has not been able to buy unless they have had a substantial deposit, typically 20% to 25% and their credit standing had to be squeaky clean. First-time buyers have been renting and hence the rental market has been booming. As the first time buyer is the catalyst for the housing market the market has been stagnating.
The solicitors, conveyancers, estate agents and surveyors involved with the housing market since 2007 have had a very difficult time and I have seen many companies, friends and colleagues call it a day.
The country needs a buoyant housing market. A large part of the services sector as mentioned above is dependent on it along with removal firms, retailers such as those retailing white goods, carpets, DIY not to mention newly build housing. This would provide some of the much-needed growth that the economists say is currently lacking.
However, we are now starting to see, dare I say it, some “green shoots”.
House Price Affordability
It has been reported that the number of first-time buyers is at its highest level since 2007 and the number is rising faster than the overall number of house purchasers.
Researchers say that house price affordability is close to its best in almost a decade and the proportion of disposable earnings devoted to mortgage payments by the average first-time buyer is standing at 27% as opposed to the high of 50% in 2007.
It was recently reported that buying a three-bedroom house is £120 a month cheaper than renting a similar house.
Funding for Lending Scheme
On the mortgage front, the Funding for Lending Scheme (FLS) is beginning to have a positive effect on lending activity and a recent survey showed that it is now easier to secure a mortgage than at any time in the last four years.
The size of the deposit for first-time buyers has been one of the main hurdles to putting a foot on the housing ladder. In 2011 a survey showed that 70% of buyers regarded this as the biggest obstacle but this view has now fallen to 59%. These statistics are supported by the knowledge that some major lenders have recently launched 95% mortgage products.
The Council for Mortgage Lenders recently reported that people with small deposits are getting access to mortgage deals and that one in 40 first time buyers are getting a 95% mortgage compared with less than one in 100 a year ago.
The Office for National Statistics reported that house prices rose 3.3 per cent in 2012 which was driven by a 6.4 per cent rise in London. Although, we do not want spiralling house prices a steady rise in house prices is healthy as it reduces negative equity, brings more houses to the market and creates a “feelgood” factor.
On the local front, we have seen a slight improvement in the numbers of surveys undertaken by Homesurv in the last 3 month period compared with the same time last year. We are therefore optimistic about the forthcoming spring market.