| UK property market back on its feet: RICS |
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LONDON: Optimism has returned to the housing market with prices seen rising once again across the UK after falling for about 15 months, a group of experts has said. The group even forecast a 4 percent rate of growth in house prices over the next two years.
The Royal Institute of Chartered Surveyors which had last year accurately predicted 3 percent growth said sentiment was certainly more positive compared to the previous 12 – 18 months. In London particularly, estate agents are now anticipating generous bonuses to help boost house sales. They found new buyer enquiries during the three months reaching the highest level in more than two years.
In their survey covering estate agents and surveyors in all the major markets, RICS found a small majority reporting prices had risen over the past three months to November. The difference is significant especially because estate agents normally expect poor business during November.
The overall house price balance in November was seen back in positive territory at +4 after the previous three months’ reading of -8.
A large number of surveyors said sales had improved while the number of properties on the market reduced giving sellers an advantage. Completed sales had risen to their highest in 13 months at 23.4 percent per surveyor. The sales-to-stock ratio moved from 30.8 percent in October to 31.8 percent in November. The group appeared confident of making substantial gains in the coming months. The property market largely appears to be back on its feet after a soft landing in recent months. It has certainly recovered from the declines and sideways movement of the previous months, a surveyor said.
One of the reasons for this upbeat outlook is the possibility of a further cut in borrowing cost. The Bank of England’s rate setting Monetary Policy Committee could consider reducing base rate by another .25 percent early next year, prompted by the response to the cut in August, the subsequent months of unchanged rates and the surge in high street sales during Christmas. The slowing rate of economic growth could also help persuade the MPC for another interest rate cut.
An alternate point of view is that the property and housing market is trying to be forced back into life with a variety of upbeat stories how it is improving when in fact it remains completely flat.
A report by Hometrack last week claimed that prices fell by 1.3% in the past 12 months and when one looks at the difficult economic situation in the United Kingdom, rising unemployment and record personal debt it will be difficult to just talk the market back to life. Without real buyer confidence in the economy, job security and with the pension crisis thrown in, it remains hard to see how property prices can increase much at all.
The underlying problem remains that first time buyers can't afford to buy and they believe that house prices are inflated to unaffordable levels either by owners or estate agents or a combination of both. Without first time buyers in volume kick starting the property chain by getting onto the ladder the whole chain grinds to a slow crawl. With residential property out of the SIPPs equation, the first time buyer is needed. With REITs schemes in the pipeline then investors may come in some form but doubtful at the same levels as those who would have invested in residential properties via a SIPP.
Yes, there may be an affordable housing program on the go but this will not suit many first time buyers, nor is it likely to assist the property market on a large scale. The issue remains that to pay a mortgage of say £150,000 for example, which is a below average or sensible price when trying to buy if you have a deposit, the mortgage applicant needs to pay around *£860 per month, plus council tax of *£100+ more, plus house insurance, buildings insurance and then heating costs on top of this before putting fuel in the car to work and food on the table.
Even with interest rates at 4.25%, a drop of 0.5% from today's rate the mortgage repayment cost would be about *£820 per month. With a couple of credit cards to pay every month it is easy to see how difficult it is for first time buyers with little prospect of change.
Perhaps house prices will increase but then again, maybe not, it depends how much the first time buyer is actually needed in the market. If they are not and property will be bought in enough volume by investors, landlords and similar then there is a chance of increase.
*Estimated figures for use as examples.
Posted
on : Tue, 20 Dec 2005 14:15 GMT | General News
By : Paula Jenkins
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