Mixed signs from the property market

11 August 2011

Recent news reports have given a mixed view of the state of the housing market, which may be positive news for those seeking to enter the world of home-ownership. Whilst low interest rates and increased lending may be good news for some, decreasing prices for prospective sellers means less availability, creating a catch-22 situation for some.

Figures released by the Council of Mortgage Lenders show June having the highest recorded number of mortgages taken out by first time buyers in ten months, rising 22% in May to June this year and worth £6.7 billion in that month alone. Fixed-rate mortgages are increasingly popular, with 63% of buyers opting for the security of knowing they will be unaffected by any sudden rise in interest rates, despite the fact no rise is likely for some time.
It has also been reported that over 800,000 people have found themselves in negative equity, although with low interest rates, they may be able to shelter from the financial storm, although any plans to move home may have to wait. A slight fall in the value of property is clearly a positive for first time buyers. However, larger deposits appear to be required to secure a mortgage, although CML’s statistics show this does not seem to be as significant a hurdle as it might appear.
This, coupled with a predicted further 13% fall in property values means that whilst those with large mortgages will be worst hit, those entering the market will benefit. The Royal Institution of Chartered Surveyors also said that 22% more surveyors reported a fall in price in July. However, a consequence of this is people are reluctant to put their home on the market; as a spokesman for RICS said: ‘Unsurprisingly, with prices continuing to fall, many would-be sellers seem unwilling to lower their expectations and are reluctant to place their property on the market’.  So whilst property may be more affordable in theory, it may not be offered for sale in order for that benefit to be felt by the market.
Meanwhile, in the buy-to-let market, there is further growth in lending with a 21% increase in the second quarter of 2011, returning this sector of the market to growth, although remortgaging accounted for 65% of this figure.