By Martin Williams, Head of Residential Property
Over the past few weeks Ive focused on the lighter side of the property debate from keeping chickens to ways to make your home more saleable. This week, Id like to look at the state of the property market as a whole, and how talk of a property bubble could be premature.
The property scene in the UK is facing complex threats as well as opportunities; there is a distinct need to re-establish a greater degree of certainty. There are lessons to be learned from bitter past experience. A quarter of a century ago, the property market looked unassailable. Chancellor Nigel Lawson decided to withdraw Miras, an important mortgage interest rebate, from two unmarried buyers purchasing a house together. There was a rush to buy in the four months beforehand followed by a market crash of epic proportions. Todays market is not like that of the heady late 80s. It is slowing even in prime central London. The estate agent Knight Frank puts this down to high prices and uncertainty over the outcome of next years general election.
Figures from the Halifax showed approvals dropped below 63,000 in April, from almost 76,000 in January. As David Smith, economics editor of The Sunday Times, puts it: "In the rest of the country (outside of London) talk of a bubble is entirely misplacedSome of the fall is due to the run-up to the Mortgage Market Review (MMR), introduced in April, which disrupted some lending. Some of it may have been caused by the refocusing of the Funding for Lending Scheme away from mortgages, announced in November. David Smith goes on to talk about the lack of availability of homes and the reluctance of existing homeowners to sell also impacting the market.
The Royal Institution of Chartered Surveyors (RICS) reports a "dearth of new instructions, with nine of its 12 regions reporting a drop of available properties coming onto the market. This could be because the returns on down-sizing a popular option for retirees are abysmal. High transaction costs are also leading to intransigence coupled with the fact that expanding families are now finding it easier, and cheaper, to extend and improve existing properties.
Though all regions have seen an increase in supply, as more people decide to try to sell, the capital has seen a rush of new sellers. With the ebb in demand and the flow of extra property choice for buyers coinciding with the slightly chaotic implementation of the MMR and its tighter lending criteria, the net result is that some of the momentum has been taken out of the market.
The rise in the number of sellers has also been seen in our region, and when combined with this months price falls in five out of six northern regions, should put paid to some of the national bubble talk. There are plenty of reasons to encourage those thinking about trying to gain that first foot on the housing ladder to do so now rather than to delay. The market is correcting itself, supply is increasing and finance including through schemes such as Help to Buy is available; albeit now with tighter lending criteria than at the outset.
Please note: This article is intended as guidance only and does not constitute advice, financial or otherwise. No responsibility for loss occasioned/costs arising as a result of any act/failure to act on the basis of this article can be accepted by Latimer Hinks. In addition, no responsibility for loss occasioned/costs arising as a result of any act/failure to act on the basis of this article can be accepted by the firm.
Martin Williamson is Head of Residential Property at Latimer Hinks Solicitors in Darlington. Latimer Hinks has a team of around 40 people serving private and corporate clients. For further information: www.latimerhinks.co.uk or call 01325 341500.