Housing Market Recovers… Or Does It?

Halifax today announced that house prices are on the rise again, up 1.1% in July, with the average house now costing £159,623.

They also say that prices are up in the three months to July by 0.8%, with this being a more useful statistic in terms of quantifying underlying trends.  This is the first increase in this figure since October 2007.

So, everything’s OK again and we should all be building buy to let empires with our lovely unsolicited bank loans?  Not so fast…

Northern Rock announced earlier this week that 1 in 25 of its mortgage customers are in arrears, so not all is well.

Unemployment is expected to get worse before it gets better, and the banks are getting their usual hard time in the media, this time for (amongst other things), not lending enough.

So, how are these figures improving?

One theory is that the housebuilders (Barratt, Taylor Wimpey, et al) spent the end of 2008 and the first half of 2009 clearing their stock of new build properties, often at silly discounts.

This had the effect of creating a false market for houses and artificially pushing down the average cost.  With little activity in the secondary residential market as people fretted about their jobs and ability to secure a mortgage, these fire sales of new build houses had a disproportionate effect on the figures.

With the supply of houses at very low levels, you can expect the figures to continue to get better, but a sustained increase in the number of completions will be the key to the market fully recovering.

Until people are confident about their jobs and the banks decide to loosen their lending criteria, tedious dinner party boasts about making a killing in the housing market look a way off yet.

  2 comments for “Housing Market Recovers… Or Does It?

  1. SHP
    August 6, 2009 at 9:18 am

    Well, the banks appear to be making most of their money from investment banking at the moment. The residential mortgage market is still in trouble – not many transactions and lots of people in arrears, so the banks are keeping their margins high and their lending criteria tight.

    Plus, the banks have to replenish the capital they blew in the crunch – either they stay weak and open to risk of failure, which is bad, or they make supernormal profits to strengthen their balance sheets/pay back the government, which everyone seems to think is bad as well! They can’t win!

  2. CityAnalyst
    August 5, 2009 at 10:12 pm

    Why is it that although the housing market is apparently recovering, and banks are starting to make a mint again, and interest rates are at an all time low, is it still impossible to get a new mortgage that tracks the BOE base rate? According to the mortgage comparison websites, banks are still only lending 75% of the cost of a property, and are charging about 3% interest. For how many years to come will the banks be ripping of the consumer in the name of the credit crunch? Boo!

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