Housing Market - Spring 2006
As a diversion from the Property Development Project I thought I would comment on some of the various projections that are being put forward for the housing market over the remainder of the year.
A number of the mortgage lenders and other pundits have been commenting on the current housing market since there has been a small upturn in the figures. It always happens that there is a variation in the figures since Halifax Building Society has a preponderance of its business in the North and Nationwide Building Society has a slight bias towards the South.
Both Building Societies are using figures for mortgages that have been taken up as opposed to the Land Registry that has to wait until house purchases are registered after completion of the purchase. This means that while Land Registry’s figures are the most accurate and cover the whole country, without any bias, they are lagging behind those of the Building Societies by as much as three months.
Nationwide has a quarterly rise of 2.3%, giving an annual rise of 4.9% for the whole country.
Halifax has a quarterly rise of 1.6% giving an annual rise of 6.2% for the whole country.
Land Registry has a report to the end of 2005 showing an annual rise of 4.6%.
So far as projections are concerned you can find a range between the doomsayers who are predicting a house price crash (as they have been doing for the past few years) to those betting on a recovery at about 6% or so. Nobody is predicting a return to excessive house price growth as the affordability ratio in relation to earnings means that there is just not the money to be borrowed at levels that can be afforded to push prices up at double digit percentages.
The only aberration is in the top of the market in London where substantial bonus payments have reignited this market that has remained dormant for over four years.
So where am I in this mix – well I see the sense in the Halifax report where they feel that house prices over the next decade will only rise roughly in line with earnings, since that will keep the affordability ratio in line with today’s figures. At the moment this means between 3.5 – 5%.
FPDSavills are predicting no growth at the moment and I have great respect for their research as they have made a far better job of getting it right over the past few years compared to any of the others.
Anecdotal evidence where I am in the South is that prices are not moving upwards but there is greater activity in the market with better buyers. This means that people are coming out of rented housing and back into owned property.
It would seem that we have been amazingly lucky in achieving a most remarkable outcome after the last period of growth in that we have a ‘soft landing’. This is rare and most welcome. Economic factors are still encouraging with growth (albeit slow) in this country, the start of growth in Germany and the Euro zone and growth in America. There is even the chance of renewed growth in Japan after a decade of deflation.
The only clouds on the horizon that I can see is that unemployment is starting to increase and that always dampens confidence in the housing market. Also all Gordon Brown’s tax increases are starting to hit the spending power and confidence of the ordinary taxpayer.
If the economy stays stable then I reckon that prices will move upwards slowly and there will be a return to normal activity levels. However any factor that seriously affects the economy or confidence levels could tip the market into recession. So let’s hope that George Bush does not invade Iran and that Tony Blair and Gordon Brown don’t dip their hands into our money any more than at the moment.
Stay tuned to Property Development Fortunes...
A number of the mortgage lenders and other pundits have been commenting on the current housing market since there has been a small upturn in the figures. It always happens that there is a variation in the figures since Halifax Building Society has a preponderance of its business in the North and Nationwide Building Society has a slight bias towards the South.
Both Building Societies are using figures for mortgages that have been taken up as opposed to the Land Registry that has to wait until house purchases are registered after completion of the purchase. This means that while Land Registry’s figures are the most accurate and cover the whole country, without any bias, they are lagging behind those of the Building Societies by as much as three months.
Nationwide has a quarterly rise of 2.3%, giving an annual rise of 4.9% for the whole country.
Halifax has a quarterly rise of 1.6% giving an annual rise of 6.2% for the whole country.
Land Registry has a report to the end of 2005 showing an annual rise of 4.6%.
So far as projections are concerned you can find a range between the doomsayers who are predicting a house price crash (as they have been doing for the past few years) to those betting on a recovery at about 6% or so. Nobody is predicting a return to excessive house price growth as the affordability ratio in relation to earnings means that there is just not the money to be borrowed at levels that can be afforded to push prices up at double digit percentages.
The only aberration is in the top of the market in London where substantial bonus payments have reignited this market that has remained dormant for over four years.
So where am I in this mix – well I see the sense in the Halifax report where they feel that house prices over the next decade will only rise roughly in line with earnings, since that will keep the affordability ratio in line with today’s figures. At the moment this means between 3.5 – 5%.
FPDSavills are predicting no growth at the moment and I have great respect for their research as they have made a far better job of getting it right over the past few years compared to any of the others.
Anecdotal evidence where I am in the South is that prices are not moving upwards but there is greater activity in the market with better buyers. This means that people are coming out of rented housing and back into owned property.
It would seem that we have been amazingly lucky in achieving a most remarkable outcome after the last period of growth in that we have a ‘soft landing’. This is rare and most welcome. Economic factors are still encouraging with growth (albeit slow) in this country, the start of growth in Germany and the Euro zone and growth in America. There is even the chance of renewed growth in Japan after a decade of deflation.
The only clouds on the horizon that I can see is that unemployment is starting to increase and that always dampens confidence in the housing market. Also all Gordon Brown’s tax increases are starting to hit the spending power and confidence of the ordinary taxpayer.
If the economy stays stable then I reckon that prices will move upwards slowly and there will be a return to normal activity levels. However any factor that seriously affects the economy or confidence levels could tip the market into recession. So let’s hope that George Bush does not invade Iran and that Tony Blair and Gordon Brown don’t dip their hands into our money any more than at the moment.
Stay tuned to Property Development Fortunes...
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