“Their principles, ethos & the fact that you can trust them to do what's best for you, set them aside from the vast majority of IFAs”

Yaser Martini - COO, MePlease.com (C London) (2010)

UK Housing market and house prices

Posted by jdavis on October 27, 2014

The above is UK mortgage borrowing to last month, from the British Bankers' Association which accounts for 90% of UK mortgage lending.

The Net Borrowing line (purple) is most pertinent.  The level of net lending (after redemptions) is lower than before the last decade!  So why are house prices rising?  We would say 'Are they'?

We know the Halifax, Nationwide, ONS etc say they are higher than last year but those statistics are historical and slanted as they want.  The fact is both mortgage approvals and actual net lending are falling.

The number of mortgages approved for house purchases was down 10% compared with a year ago according to the BBA.  Approvals have slowed since June.

Also, we know that Central London is negative year on year and this will impact the national picture.

Just last week high-end estate agency Strutt & Parker put out a stark briefing.  Its Q3 figures for 2014 in prime central London (PCL) revealed a 20.8% decrease in the number of homes sold below £2m, compared to the same quarter last year.

Even worse were its figures for homes in the £2m to £5m range - down 27.1%!

That's a fifth to a quarter down on last year...

Also last week Foxtons, the London agent, which has over 50 branches across the capital issued a profits warning saying it has endured a "sharp and recent" slowdown in sales.

Look at Foxtons share price chart:

That's a fall of c 60% since the end of February.  Arguably there is no company more inextricably linked to the London housing market (all London) and the share price has collapsed this year, as we have been telling our clients for months.  Does not look good for the market or prices.

As to why the market is turning down, well as ever it could be a multitude of reasons.  Take your pick:

  • EU sanctions v Russia
  • China slowing down
  • UK household earnings rising slower than the costs of living (for the last 6 years)
  • Specifically public sector salaries not growing as fast as they did under Labour
  • Higher and higher taxes on properties bought within corporate structures
  • Potential for a Labour Government from next year to levy taxes on high value properties
  • Prices are just too high and reality is setting in
  • etc

In any case, the market in 2014 has been something of a reverse from 2013, as we have been informing clients for months.

None of the above, by itself, is necessarily permanent.  Probably the Chinese slowdown is the biggest permanent danger to house prices in London and the UK.  If it, or something else, creates the next global economic shock, be assured the UK will not be immune.

You have to ask what will the policy makers do to get us out of the mire next time.  In 2009 they bailed out the banks (by borrowing vast sums from our children) and they slashed interest rates.  The former they will do again, or Bail Ins a la Cyprus 2013.  The latter they will simply not be able to do as rates are already near rock bottom.

THEN you have permanence setting in on the housing market and prices.

Turning Japanese?
 

Comments

There are no comments on this post. Why not add one below?

Post a comment

What is 4 times seven?