Monthly Market Review - October 2010
The recent Comprehensive Spending Review delivered by the Coalition Government has highlighted the tough measures they intend to adopt in order to facilitate economic recovery in the UK. Everybody is going to feel the effects with £81bn to be cut from public spending over four years. The potential loss of around 500,000 jobs is surely going to result in a demographic change in cities such as Newcastle and Oxford where approximately 40% of the work force is public sector. We do not think it will be long before this news impacts on the UK housing trends, yet for the time being it is the anomalies of recent months that seem to persist regardless.
Published housing indices have made for interesting reading of late, and the mercurial goings on with stock, demand and sales must surely be confusing most of the general public. Nationwide has produced data showing a 0.7% decline in house prices in October (+0.1% in September), a sentiment supported by Hometrack at a slightly greater 0.9% decrease last month. The most surprising figure has to be from Rightmove which shows a hefty, and some may consider illogical, 3.1% increase in asking prices for October. Whilst it is traditional to enter a more bullish autumn market, it seems clear that vendors are struggling to react to the increasing stock as most are unwilling or unable to adjust to new market conditions.
Whilst property prices overall have risen since the low of Easter 2009, no-one has escaped the recent declines. Even in the resilient London market there has been a marginal downward shift in October with the average Prime London property falling by 0.8% and Prime Platinum prices dropping by 1.2% over the month. The prime regional housing market is far less reliant upon debt finance and is less affected by tight constraints on lending, unlike the mainstream markets so it is interesting to note that of the country properties, it is the higher end of the market which is proving to be most price sensitive. The British Bankers’ Association has announced that the number of mortgage approvals was 26% lower in September than at the same time last year; mortgage lending is at a 10-year low. It must not be forgotten that the previous inflation was fuelled by the relative ease with which purchasers could borrow 95% or even 100% mortgages.
The short term trends do give some cause for caution. We believe, as do many other experts that 2011 is going to be a tough year for the property market taken as a whole, but it provides buying opportunities for those with access to funds. CML director general Michael Coogan comments “Funding pressures on lenders remain, and the practical implications of government and public spending cuts are beginning to emerge, with a resulting impact on consumer confidence”. Consequently interest rates are likely to remain at historically low levels for longer than originally expected.
Garrington regards strong negotiation to be paramount for purchasers in any market, but particularly during the current period of uncertainty where attractive purchases can be made. Over recent years Garrington has achieved some of the highest financial savings off asking prices during the winter months. This compounded with the current volatile economic landscape is likely to present exceptional buying opportunities for the well-informed purchaser.
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