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Property market shows signs of life
Posted at 11:13 26/03/2009 by Olly.
Easter is when the housing market is supposed to pick up after its winter hibernation, and there’s some evidence that activity is indeed picking up, with estate agents reporting a shortage of properties on their books and sales going through more quickly than for many months.
Mortgage approvals, though, which are usually an advance indicator for housing activity, haven’t shown an upturn, but experts say the fact that they have stopped falling and have levelled out at about 31,000 a month is a modestly encouraging sign.
Not such good news is a drop in rents, caused by a big wave of new lettings that started last autumn. Hundreds of thousands of people unable or unwilling to sell their homes have started to let them, leading to a bigger supply of rented property and causing a decline in monthly rents of a few percent in the past three months.
First-time buyer affordability has improved dramatically since early 2008, and though mortgage availability is still a problem, housebuilders are quietly selling off thousands of homes with pre-arranged mortgage deals at reduced prices to first-time buyers.
The average fall in house prices over the 12 months to February was just under 18%, but regional variations are quite wide and so are those in different types of property, with new-build two-bed flats showing price falls of as much as 40% over the past 15 months. This is a sector where there’s evidence of bargain-hunters, with reports of investors buying for cash.
Rising unemployment will keep the brakes on the housing market, but people in work will see big gains in their disposable income this year, thanks to lower mortgage costs and utility bills. So millions of existing homeowners will have the firepower to trade up if they want to - all they need is confidence that prices aren’t going to fall further.
The worst-case scenario of a further fall in prices of 10-15% looks less likely now, and provided mortgage availability continues to improve, the optimistic scenario of a gentle ‘bottoming-out’ between now and autumn is starting to look more likely.
