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House prices have begun to fall in the Greater Riga area – a fall of 3.5% in the month of June 2007, following a fall 1% in May 2007, according to the leading Latvian real estate agent Latio. Prices have fallen “for the first time in history”, says Latio, which if not quite accurate, emphasizes the sense of shock.

These figures are consistent with recent warning signs. But they are all the more shocking in that year-on-year to Q1 2007, Latvia was Europe’s strongest performing housing market with house price rises of 44.23% during the year, according to Latvia’s Central Statistical Bureau.

The Global Property Guide (www.globalpropertyguide.com) believes these latest figures signal the end of the Great Baltic House Price Boom. Estonia started falling before Latvia, as is normal in the Baltics. We have long suggested that low rental returns in the Baltics mean that investors should be very cautious.

The decline of house prices also reflects several serious economic problems which have accumulated in Latvia:

• The current account deficit rose to 26.3% of GDP in 4Q 2006, from 15.2% a year earlier.

• Inflation was sharply up at 8.9% in April 2007, up from 6.5% last year, and 1.9% in 2002.

• Loans to residents grew 60.4% in the year to Q4 2006 (58.2% and 61.7% in the previous two years).

• Long-term interest rates are sharply up.

(See the Global Property Guide’s coverage of Latvia)

In February Standard & Poor’s (S&P) put on negative watch its rating in Latvia’s long-term forex-denominated liabilities, and then on 17 May lowered the rating from A- to BBB+. This brings Latvia back to the rating it held in 2002.

The Lats, pegged to the Euro since January 1, 2005, came under pressure in February in response to the S&P revision, and the Bank of Latvia had to intervene. The Euribor interest rate on Euro variable rate loans jumped to 10% in June 2007, from 5% this January. Obviously, this rise in interest rates has had a substantial effect. So too have government attempts to cool the market through the banking system. So too have recent legislative changes, e.g., the imposition of a 25% tax on personal income from real estate sold within a year of purchase.

Painful adjustments needed

Till recently Latvia was Europe’s No1 house price performer. Now Latvia is in deflationary mode, with house prices falling and spending restrained.

Local players can be expected to adjust to the new realities, but with a delay, which can be expected to exaggerate the downturn. In June, 2007, 19 new housing projects were announced, after 15 projects in May, April, March, and January this year (February saw a spike in apartment project launches to 26). This means that by historical standards, a very large number of new apartment projects continues to come on to the market.

Lower residential returns signal stop!

The price of good quality used apartments in prime locations in Central Riga ranges from €2,900 to €3,143 per square metre, according to the Global Property Guide (survey conducted 24 Nov 2006). Houses in similar locations are slightly cheaper, ranging from €2,521 to €2,700 per square metre.

These prices are high relative to Latvia’s GDP per capita, being on a par with Scandinavian countries.

In Riga, city centre average prices rose from around €1,264 per sq. m. in August 2004, to around €3,011 at end-2006 – a 138% increase in just over two years.

Meanwhile, in Riga average monthly rents have risen, but not nearly so much, from around €8.20 per sq. m. to around €12.64 per sq. m. – an increase of around 54%. Riga rental income returns (average for all sizes) have therefore fallen over the past two years, from around 7.85% to an average of 5.04% (the figures in the table above represent not average yields, but yields for apartments of 120 sq. m.).

These yields are not unreasonable. However in the particular situation of Latvia, such moderate yields, in the context of a continued very strong stream of new apartment offerings, and a sharp uptick in local long-term price of money, would make us very cautious.

Unless the economic cycle has disappeared from economics, it would seem to us that a cyclical peak has approached, and that for the moment investors should pause.

Publisher and Strategist:

Matthew Montagu-Pollock

Phone: (+632) 867 4220

Cell: (+63) 917 321 7073

Email: editor@globalpropertyguide.com

Address:

Global Property Guide

http://www.globalpropertyguide.com

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115-117 Esteban Street

Legaspi Village, Makati City

Philippines 1229

info@globalpropertyguide.com

Description:

The Global Property Guide is an on-line property research house.

Terms of Use:

On-line newspapers, magazines, etc wishing to use material from this press release MUST provide a clickable link to www.globalpropertyguide.com.

Property group announces, the reason being global bank interest rate hike, which forces the customers to shun away from investing in real estate. It is expected that the unit price could slash to a massive ten percent by the coming year, which is the major cause for fall in Australian property value.

Australian Property Monitors (APM) surveys that the house prices have fallen in Brisbane and other four major cities in Australia in the previous months causing the worst ever market fall in the last four years. It is also analyzed that a further dip of about 10% could be seen in the next few months. Brisbane poised a 3% slam in property rate falls only after to Hobart and Perth, whereas, Perth stands at 2.8% and Hobart at 3.8%.

Property group learns that the fall of prices of Brisbane house prices by 5% may be due to the auction clearance rates which were hiked from 25% to 60%.

Here it is also to be noted that the inflation has bloated to 4.5% in the month of June to increase the June quarter consumer price index (CPI) by 1.5%. This results in an ultimate increase in cost of living by 4.5%. It is also viewed as the highest since 1991. This inflation puts Brisbane house prices to fall by 5pc as it has been alleged by the property group.

This fall by 5 percent is a result of the increase in the consumer price index (CPI and as such there has been a hike in housing loans and in the price of crude oil. So today it happens that we spend more and buy less. Even though the purchasers have reduced on their expenditure the cost of living has increased drastically.

You will be surprised to know that the increase is beyond the suggested Reserve Bank of Australia (RBA) range of two to three percent. You would be wondering where the predicted 1.3 % and the range of 4.5% were seen today.

It is also seen that Brisbane is the only city where both house rates and unit values have come down drastically. It is even predicted to drop further to ten percent in a years’ time. There by a reduction of forty four thousand dollars from a house is estimated. In the coming years the loan formalities would even worsen, with increase in interest rates, the customer will be forced not to invest in real estate. Here, the banks have started increasing the mortgage rates and if the Reserve Bank of Australia increases the interest rates, it will make matters worse.

Already, real estate dealers have less construction work and most of them have put a halt to their dream of buying a property. In Queensland alone a fall of 7.3% was experienced during the month of June, proving that Brisbane house prices would fall by 5%

What does Mr. Warwick Remby say on “Brisbane house prices to fall 5pc that they have also initiated problems like credit controls, hike in interest rate and increase in cost of living. The property group data also reveal that this may move to ten percent dip in the coming months which could paralyze the housing industry in the state.

Let’s start with Nationwide and Halifax.  Both provide mortgages and their house price figures are based on their mortgage approvals, not on completed sales (remortgages and further advances are excluded).  Their data includes property from the whole UK market but each is based only on the mortgages passed through their companies, a much smaller sample compared to the Land Registry.  They do not include cash buyers nor sales that fall through.  As their calculations can be done at the time of the mortgage approval they have their data sooner and are able to broadcast their figures before the Land Registry. 

The Land Registry is based on actual completed sales regardless of any mortgage or cash buy.  The Land Registry data set includes residential property transactions in England and Wales and does not include Scotland or Northern Ireland.  It’s calculations are based on repeat sales so that the prices changes on the same properties are measured.

Property websites such as Rightmove report on house prices but their figures are based on residential property asking prices (England and Wales only).  Since offers are made on nearly all asking prices this does not help with accurate information but it will show general trends and contribute to the general picture.

Related to house prices, the British Bank Association provide statistics on lending, including mortgage figures: how much was lent and how many mortgages were taken out.  And so the property market can be measured by tracking how many mortgages were taken out in any month which usually follows the trends of house prices.

So let’s compare the house price figures for April 2009 from each of the mentioned reporters:

Nationwide reported a monthly fall of 0.3% and an annual fall of 15%.

The Land Registry reported a monthly fall of 0.3% and an annual fall of 16.2%.

Halifax showed a monthly fall of 1.8% and an annual fall of 17.7%. 

Rightmove showed a monthly increase of 1.8% and an annual fall of 7.3%. -  this may show that new sellers are setting too optimistic an asking price.

There are many more reporters on house prices and all can contribute to how the property market is fairing but generally the most accurate report for England and Wales is from the Land Registry .  The results together can show a trend and provide historical information.  However, people are very keen to have forecasts to gauge when to buy or sell and the above companies monthly reports do also include some general predictions.

It is also worth reading the general economy news and outlooks as property prices are dependent on the general economy in terms of employment (people need to be employed to get a mortgage to buy a house), interest rates (low interest rates are great for now but there are only low because the economy is in such bad shape), mortgage availability and the general global economy.

Looking at these different aspects, the ride for house prices for the remainder of this year is likely to be bumpy.  Keep reading the reports and keep an eye on the property that is right for you. 

In recent years much of the British public have made property into a sort of hobby. The TV shows have followed enthusiastic DIY’ers doing up some half derelict house into a lovely family home, rub hands with glee over the profit that was made, or alternatively spend over budget and be coping with difficulties along the way. We’ve seen how to transform rooms in an hour, how to buy property at auctions, or how to build a house from scratch. And so on it goes.

With so much of our wealth invested in our property and with so much money having been made in the rocketing house prices up to August 2007 no wonder we are watching house prices closely. A lot of people have done well in the past. If we missed out on the good investments in the last round we want to be in the action if there is another rally.

However, be careful. In May house prices rose 2.6% compared with April and this was the fastest rate of growth since 2002 (Halifax) but is this sustainable? Is the wider economy supporting a rise in house prices? And as the end point, should you buy now if house prices are to continue to go up?

Let’s see why house prices have gone up recently.

There is a combination of reasons to go in the pot. More new buyers are registering an interest and members from the Royal Institution of Chartered Surveyors reported that buyer inquiries increased in May for the seventh month in a row and at a fastest rate since 1999.

Yet, with the property market having dropped to such an extent would-be sellers are holding off putting their property on the market. New instructions have continued to fall with the average number of properties on an agents book having dropped from 69.4 to 58.4 in May. There are not many properties on the market and there are new buyers wanting to snap up seemingly cheap properties along with the low interest rate.

Plus it’s traditionally the house buying season. Spring is the peak time of the year when people buy and sell property – interest usually picks up in February after the New Year, people can be settled in by the summer when the holiday period starts and then it’s the new school year and getting ready for Christmas!

The economy may be seeing glimmers of good news but the Bank of England’s latest Inflation Report warned that the economic outlook was still very uncertain. The unemployment rate is currently 7.1% (2.22 million) and many economists predict unemployment to go above 3 million or 10% in 2010. According to the Office of National Statistics, in previous recessions unemployment took about 6 years to return to pre-recession levels.

Finance for first time buyers, although is improving, is still limited and has strict lending criteria.

For house prices to stabilise there needs to be stability in the wider economy. For house prices to rise on a consistent basis employment needs to be falling and that seems highly unlikely in the near future.

If you want to buy now and find what you want then the chances are that you’ll be buying at a good time. However, there’s still a high risk that house prices will fall as unemployment rises and therefore you need to be prepared to hold it for a number of years.

It has been a dismal year for house prices, according to the Global Property Guide’s latest survey of publicly-available house-price time-series for the year 2008. And seen from a global perspective, the downturn is still accelerating.

The collapse of the world’s housing markets can be seen from three points of view, and unfortunately, all of them reinforce the bad news.

During 2008, the downward price momentum accelerated, as compared to 2007.
Only 2 countries saw positive momentum in 2008 (a slower downward house price movement than last year, or faster upward movement), while 28 countries saw their housing market momentum deteriorating, compared to the previous year. The two countries with a positive momentum were Germany and Switzerland.

During 2008, house prices fell in most countries.
During 2008 only 8 out of 32 countries saw house prices rise, after adjustment for inflation, while 20 countries experienced house price falls.

In contrast, during the year 2007, the downturn was just beginning, and only 6 countries saw house prices fall, while 24 countries saw house prices rise (all figures inflation-adjusted).

Many house-price falls during 2008 were extremely severe. Countries with house price falls of over 10% during 2008 were Latvia (Riga) (37%), Lithuania (Vilnius) (27%), the US (20%), the UK (18%), Iceland (16%), Ireland (12%), and the Ukraine (Kiev) (12%) (all figures inflation-adjusted).

During the final quarter (Q4) of 2008, the downward price momentum significantly accelerated, as compared to Q3, suggesting that the situation is deteriorating.

During 2008’s final quarter, 9 countries saw house price falls of 5% or more during just that quarter. Price drops of more than 10% during this single quarter occurred in three countries – in Latvia (Riga), which saw price falls of 15%, in Ukraine (Kiev) (13%), and in Hong Kong (15%). Other countries with Q4 house-price falls of 5% and over, included the UAE (8%), Lithuania (7%), Iceland (7%), Singapore (6%), Bulgaria (5%), and the UK (5%) (all figures inflation-adjusted, except UAE).

These price falls were much greater than during the previous quarter, Q3. During that previous quarter, only two countries experienced house-price falls (inflation-adjusted) of 5% or more, and no countries experienced house-price falls of more than 10%.

REGIONAL SURVEY BY GLOBAL PROPERTY GUIDE

Europe has major problems
The Baltic countries of Latvia and Lithuania suffered the hardest price falls both in nominal and real terms. In Riga, Latvia, the average price of standard-type apartments plunged 37% during 2008. Prices have been going down in Latvia since late 2007, after a remarkable increase of about 70% in 2006. The most alarming decline took place in the 4th quarter, when prices declined by 15%, the steepest quarterly drop in real terms in any country. These price falls were triggered by increased interest rates, and by the tightened credit rules which Latvia imposed in 2007.

Average prices of apartments in Vilnius, Lithuania, fell by 27% during 2008. House prices started slowing in mid-2007, and crashed in early 2008.

House prices in the UK plummeted by 18% in 2008. Although mortgage interest rates dropped slightly, to 4.48% in December 2008, the number of loan approvals for house purchases fell 58% in 2008.

There is serious trouble in Iceland (house price fall of 16% during 2008), Ireland (12%), Ukraine (12%), Malta (9%), Portugal (8%), France (8%) Finland (7%), Norway (6%) and in Spain (6%).

North America’s woes
In the US, the centre of the global financial crisis, in 2008 house prices fell 20% according to the Case-Shiller house price index, which emphasizes urban areas. OFHEO and FHFB figures, which are associated with Fannie Mae and Freddie Mac loans and have somewhat lost credibility, suggest a smaller decline of 6% and 3% respectively, during 2008. The US government recently approved a $ 787 billion economic stimulus package, of which 5 billion will be allocated to rescue the ailing housing market.

Canada has been much less affected than the US.

Pacific heads down
Both Australia and New Zealand saw house price declines during 2008, of 7% and 8% respectively.

Asia no longer insulated
Housing markets in Asia have not been insulated. Singapore, Hong Kong and Philippines recorded house price falls during 2008.

Singapore’s private residential prices dropped 9% during 2008, in sharp contrast to the 26% price increase of experienced during 2007. The developed countries’ economic troubles adversely affected Singapore’s exports, and during 2008, output in the manufacturing sector, particularly of electronics, precision engineering and chemicals, shrank by 10.7%. Singapore was officially in recession in Q3 2008.

Hong Kong has been badly hit by the crisis. House prices were down by an average of 6% in 2008. But during the last quarter, Hong Kong experienced a severe decline in prices of 14%.

In Makati, Philippines, prime 3-bedroom condominium prices fell by 2% during 2008, after an 11% price rise during 2007. Nevertheless construction of high-rise residential buildings continues, with residential condominium stock rising by 7% during 2008, according to Colliers Philippines.

Japan recorded modest Tokyo condominium price rises of 1.2% during 2008. On the other hand, land prices in Japan’s six major cities fell by 6% y-o-y to Sep-2008.

In Shanghai, China, house price rises slowed to 5% y-o-y by the end of 2008, after peaking at 30% y-o-y to May 2008. However Shanghai is likely to be somewhat exceptional, and Xinhua News Agency reported house prices declines in 70 major cities during 2008. Shenzhen suffered the hardest fall, with prices down by 18% during 2008

UAE on shaky ground
In Dubai, UAE, despite the bleak global picture, saw surprisingly large dwelling price rises of 41% during 2008. However during the year’s final quarter, prices fell by 8% in nominal terms. This downturn is attributable to strongly tightening lending criteria, an increase in interest rates, multiple layoffs, and alarm among buyers.

Forecast: No recovery in 2009
History suggests that in a crash, housing markets take many years from peak year to full recovery. In view of this and of the pessimistic IMF forecast for the global economy, no real recovery is likely in the global housing markets this year.

The IMF has predicted that the world economy will grow by 0.5% in 2009, the lowest level in 60 years. GDP in advanced economies is expected to decline by 2% during 2009. The United Kingdom and Japan will be hit the hardest. Output in the UK may contract by 2.8%, while Japan’s may fall by 2.6%.

Growth in emerging economies is expected to slow to 3.3% in 2009, down from 6.3% in 2008. Developing Asia is forecast to be the least affected, with growth of 5.5%. China’s economy is predicted grow by 6.7% in 2009, but this is a substantial decline from 9% growth during 2008.

We cannot be optimistic for five reasons:
• Valuations still clearly remain stretched in most countries, in terms of price/rent ratios.
• Economic growth is slowing or negative in many countries, which is negative for housing values.
• There are no signs that banks are becoming more willing to lend.
• The unprecedented nature of the financial system’s collapse has greatly added to the difficulties facing the world’s housing markets.
• Some national governments are experiencing difficulty in refinancing their national debt, putting their currencies under pressure. Currency instability is likely to aggravate housing sector problems in countries where many loans were taken out in a foreign currency.

The positive news is that the US government and several others are acting with vigour, as has the IMF. Nevertheless, there is a long tough road ahead.

###
Description of the Global Property Guide:
The Global Property Guide (http://www.globalpropertyguide.com) is an on-line property research house, specializing in analyzing residential property valuations around the world.

Terms of Use:
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Requests for Comments:
Requests for comments are best made by telephone to +(63) 917 321 7073. UK-based callers should telephone before lunchtime. Our local time is Hong Kong time, i.e., standard time + 8.00

Economics Team:
Prince Christian Cruz, Senior Economist
Phone: (+632) 750 0560
Email: prince@globalpropertyguide.com

Publisher and Strategist:
Matthew Montagu-Pollock
Phone: (+632) 867 4220
Cell: (+63) 917 321 7073
Email: editor@globalpropertyguide.com

Address:
Global Property Guide
http://www.globalpropertyguide.com
5F Electra House Building
115-117 Esteban Street
Legaspi Village, Makati City
Philippines 1229
info@globalpropertyguide.com

Top 1. Monte Carlo, Monaco
Monte Carlo residents enjoy the benefits of Azur (Cted’Azur) of sandy beaches, enchanting nightlife and tax havens, but they also have to pay the price. The resort for the second consecutive year in a global market prices the highest title list, average house prices up to 4420 U.S. dollars per square foot.

Top 2. Moscow (1937 U.S. dollars per square foot)
Driven by strong economic growth (and to some extent, is due to the recent high oil prices) and rising house prices in the first three quarters, Moscow rose two, jumped to the top three. According to the U.S. Central Intelligence Agency (CIA) of the “World Factbook”, last year, Russia’s GDP increased by 6%.

Top 3. London (1928 U.S. dollars per square foot)
One of the world’s financial centers of London, of course, high prices, reaching 1,928 U.S. dollars per square foot.

Top 4.New York (1,384.1 U.S. dollars per square foot)
As the Asian market to promote Hong Kong and Tokyo jumped to the top five, New York fell to sixth place from second, this is surprised. In last year’s survey, Hong Kong and Tokyo apartment prices per square foot up to 1,373 U.S. dollars and 1,103 U.S. dollars. The average house price in New York, 1384.1 U.S. dollars per square foot.

Top 5. Hong Kong (1373 U.S. dollars per square foot)
House prices  is also very high in Hong Kong.As land is scarce, a lot of permanent population, so the house has been in short supply.

Top 6. Paris, France (1,126.20 U.S. dollars per square foot)
Paris, fashion capital, house prices are as expensive as a luxury.

Top 7. Tokyo (1103 U.S. dollars per square foot)
As the world’s most crowded cities, Tokyo has a high house prices is not surprising.

Top 8. Singapore (901.20 U.S. dollars per square foot)
Lion City Singapore has beautiful environment,and attracting people to settle of many countries, so house prices are high.

Top 9. Rome, Italy (851.50 U.S. dollars per square foot)
Italy is also a place of art and fashion, so the capital of Rome’s price is high.

Top 10. Mumbai (851 U.S. dollars per square foot)
It is surprised, Mumbai is also selected. Because of India’s growing population, rising prices are also normal.

How to Limit the Housing Price

 

Recent years have seen great changes in the housing price. There is no doubt that our government should take some measures to limit the increasing trend of housing price. In the passage, we will talk about some measures our government take to control the trend.

 

It is understood that the core of the approach include: when there was a substantial price rises, the provincial government agreed that the provincial price authorities have the right to limit sales of commercial property prices shot directly, such as direct limits the profit level, direct sales price limit and so on.

Evaluation of a real estate industry, said National Development and Reform Commission through the relevant departments such as the visible hand of regulation and control of real estate is not surprising. Because under the current “Price Law”, the price department to take such measures can be done according to the law.

“Price Act” provides for five categories of commodities and services to the government-guided prices or government pricing, of which three are as follows: First, national economic development and people’s lives and of great importance to a small number of commodity prices; the second is a small number of scarce resources commodity prices; third is a natural monopoly prices. Many analysts thus believe that, combined with the reality of ordinary commercial housing prices return to pre-housing reform “government pricing” has its own rationale.

It should be noted that, in the use of “Price Act” regulate the real estate market, some local governments have been trying. September 1 this year, since the implementation of the “Shenzhen City real estate market regulatory measures” clearly states: the general price level of the real estate market volatility and other abnormal conditions occur, the price can be integrated management of real estate development in conjunction with the relevant authorities enterprises to take notice, the meeting, written notice, interviews, etc. to give advise caution, warning reminded of yet on price behavior norms, the violation of laws and regulations, from the price supervision and law enforcement departments for punishment according to law.

Back in May, there have been media reports that the Development and Reform Commission is leading the drafting of a ratio of “ten countries” more stringent regulation of real estate policy, which involves the Government in the property market in the play what role. In the year the State Council on the implementation of the “Government Work Report” division of opinion in the key departments, “to promote stable and healthy development of the real estate market,” column, as the lead unit of the Department of Housing and Urban Development and Reform Commission is ranked second.

For the market as whole October’s indices were as follows: 

Land Registry:   -0.2% 

Nationwide:      -0.7%     (3 month figures -1.5%)  

Halifax:             +1.8%    (3 month figures -1.2%)

Hometrack:       -0.9%

Data is confusing with indices measuring different geographic regions and different cash/mortgage transactions.  Even the chairman of Persimmon has requested more accurate data and that mortgage lenders should collaborate to produce just one 3 month index which would smooth volatility and be a better measure of underlying trends. 

The house price average now lies somewhere between £156K-£167K depending on which index you use.  In terms of the South East this is higher at £212K (Oct down 0.3%: Land Registry) and in London £340K (Oct down 0.6%: Land Registry). 

Into the future, the hoped for housing recovery has certainly petered out.  Confidence is low impacted by poor job security, tax rises, cuts in benefits and mortgage approvals of still less than half their pre-crisis level.  As a result new buyer enquiries are falling.  The number of homes coming to market is increasing, however, driven largely by the 3Ds (debt, death and divorce) as most other sellers are holding off.  Consequently, prices will continue to drift (as opposed to plunge) downwards.  This will add to fears that those with large mortgages taken out pre-recession will find themselves in a negative equity situation.

Needless to say different areas will feel the impact to a lesser or greater degree.  Central London remains the most shielded in terms of house prices which are still higher than in October 2009.  This is due to active cash buyers, less dependence on mainstream mortgages and greater equity.  Foreign demand also continues to be high (making up over half the Central London market) although there is now more reliance on buyers from Asia, Russia and the Middle East as opposed to the traditional Europeans who are also feeling the pinch.  Despite not benefitting quite as well from the financial bonus situation the outlook remains more upbeat than the rest of the country but further slippages are likely short term.  After the usual time lag, London prospects will, as always, spill out to the rest of the South East.

Those in the North will to be more susceptible to changes in interest rates, the availability of mortgage debt and employment prospects.  The government’s spending cuts are likely to hit hardest in the North with statistically more people employed in public sector roles in this area of the country. 

Overall, it remains a buyers’ market for all those but first time buyers who are still struggling to raise sufficient deposits.  If your home is on the market currently you need to be very realistic if you are to achieve a sale with many agents feeling that asking prices are still 5-10% too high, although good properties in desirable locations will, as always, be snapped up. 

Conditions are unlikely to change in the run-up to Christmas and whilst it is possible the Bank of England could step in short-term to support the market by reducing mortgage rates, improving the wholesale funding costs for banks and raising inflation expectations, it would be unwise to hold your breath.  Into the New Year interest rates should start to slowly rise again and many lenders are already factoring this into their lending decisions. 

In conclusion, the credit crunch will continue to impact on the housing market for a few years to come.  No real growth is expected until 2012-13 and this will start in London and the South East with the North being the last to see any consistent positive improvement.

Recently in the news…

·      Galliford Try/Linden Homes was crowned Housebuilder of the Year by Housebuilder magazine.

·      The Head of the Council for Mortgage Lenders spoke out against FSA proposed regulation saying many mortgages could be restricted in order to prevent only a few defaults. 

·      Housing Minister Grant Shapps has promised to cut red tape and make it easier to build homes. 

·      Over £900M has been earmarked to encourage local authorities to build – for every new home the authority will get a bonus equal to at least the annual council tax.

·      Housebuilders Bellway, Bovis, Redrow and Galliford Try have all recently reported improved results although the words “encouraged”, “cautious” and “frustrated” would perhaps more aptly sum up their status.

According to Nationwide house prices rose by 1.3% in July, taking the annual change in prices from -9.3% in June to -6.2%.

Whilst house prices were in free fall in 2008, few houses were selling and as a result there are now a pool of prospective buyers ready and able to buy property.  Now that the economy is showing signs of recovery and the banks having been bailed out by the government to such a massive extent, buyers are tentatively coming back into the market, wanting to benefit from the historically low interest rates and house prices.  

However, the rise of 1.3% in July is not expected to continue at the same rate in the coming months.  Unemployment is expected to reach 3.2 million in 2010 and with high unemployment and with continued job insecurity, existing owners are more unlikely to sell and buyers are less confident in their investment. 

However, on the other side of the coin, this means that there will continue to be a shortage of property and prices could continue to improve.  Housing constrution has fallen well below government targets and 2009 represents the lowest level of housing construction on record. 

According to Halifax house prices increased by 1.1% on average in July.  They also show that number of mortgages approved increased by 22% between the first and second quarters of 2009. The low interest rates have reduced mortgage payments: in July 2009 monthly repayments accounted for around 21.4% of the average gross household income and this is the lowest proportion of household income since mid 2004. The long-term average is 20.4%. 

The Center for Economics and Business Research predict that house prices will fall by 3% for the remainder of this year and would then rise by 2% in 2010 and 3.6% in 2011. 

The future of house prices continue to look uncertain.  In the short term, unemployment is continuing to rise and the economy, although improving, is still looking shaky – could there still be a “W” recession? – no one is sure yet.  Currently prices are being buoyed by the shortage of property available for sale and the low interest rates.  This could continue as sellers remain reluctant to put their property on their market. And over the long term there is expected to be a shortage of housing which will keep house prices at a sustained premium. 

House prices are unlikely to fall dramatically over the next few months – there simply isn’t enough property on the market to  sustain hungry buyers. The time to watch will be when the reluctant landlords put their houses on the market and then there could be a risk of there being too many properties on the market…