Musings of a London Property Search Agent
Nationwide published their House Price Index for November today with news that falls in the Property Market stabilised in November and that conditions were right for demand to rise again if the availability of credit improves.
Fionnuala Earley, Chief Economist of Nationwide comments:
“Turnover rates in the housing market have fallen to historic lows, even below the levels in the 1990s
when the economic conditions were worse than they are today. At the trough of the market in Q4 1990, interest rates were at 14% and there were almost double the number of unemployment claimants, yet a greater proportion of owner occupiers were taking out mortgages to move house. The significant difference today is the financial market shock which has led to the severe tightening of credit. In Q4 1990, 60% of first time buyers were taking out loans with LTVs above 90%, today the equivalent proportion is 14%. While this may reflect less desire on the part of borrowers to borrow at high LTV, especially given its higher cost, it also implies that part of the reduction in turnover today is likely to be due to the availability of finance at higher LTV.
€œNot all of the limits on lending will be due to the turmoil in the markets. Some will be due to more traditional underwriting criteria taking effect in a slowing economy with falling house prices and some will be due to more accurate pricing of risk. Nevertheless it is clear that the uncertainties in the financial markets are still affecting the availability and costs of funds in the markets as banks deleverage, and this has an effect on borrowers. If funds once again became more freely flowing as a result of Crosby€™s recommendations, this could stimulate levels of activity in the market and thus help to promote a swifter recovery. While there is still a great deal of uncertainty about the appetite of investors for mortgage backed securities, a government guarantee may be the catalyst required to restart this market and begin to add liquidity, especially as affordability is now improving.€
In short – blame the bankers who bought into sub-prime. There is still demand for UK property, and homes in the South East in particular. If the credit crunch eases then so will the woes of the housing market. This London Property Search Agent is optimistic about property prices in the medium term – our advice is to buy now if you canraise the funds.