In among all the doom and gloom that is being thrown around at the moment there are a few people stating that they see the very early indicators of a recovery. This is such cheerful news that I thought I would give you my potted understanding of how that recovery is going to look. According to the experts it comes in four stages.

Stage One: At this point the mortgage sector is still constrained but investment is beginning to be encouraged. You usually start to see some people investing, the cash rich because there are bargains out there and foreign investors attracted by a drop in the value of the pound.

Stage Two: This is likely to be the longest stage and can be mistaken for stagnation. Anybody who is heavily reliant on credit is still excluded from the market and prices are likely to be static. Those who are equity rich though will be starting to become quite active.
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The FT confirmed once again last week that the number of buy to let properties being abandoned is on the rise.

Figures from the Empty Homes Agency show the number of empty homes in England rose to 697,055 at the end of 2008, up from 672,924 at the end of 2007 – the biggest annual rise for 17 years. And as if that is not enough they further predict that things are going to get much worse.

They predict that empty homes will reach 1 million by the end of this year. With a number of landlords just handing back their keys after deciding they cannot afford to keep the property on.

Chelsea Business Society waded into the debate to give us some much needed perspective though with a spokesman stating “Exact numbers are confidential but in 2007 there were less than 25 for the total year and for 2008 we experienced an upturn of approximately two times this number.

“Against a backdrop of approximately 95,000 loans, this is something which does not give cause for concern.”

Thank goodness for someone giving us other than gloomy news.

It seems that grim news is fairly par for the course at the moment.

The FSA  kept the trend going last Thursday,  when they suggested that 2 million UK homes will be in negative equity by the end of the year.

And that is just the homes that owners live in. In another cheerful piece of information they further suggest that 500,000 buy-to-let houses will join the two million.

In reality what this means is that one in four homeowners would have to find other funds to pay off their homes if they were to sell now. That figure is one in two for the buy-to-let market.

This is a kind of pressure the housing market could well do without at the moment. It is likely to lead to more financial distress for beleaguered homeowners and landlords.

If you are not selling your home you may think that it is no big deal if you are in negative equity but in a lot of cases you will be wrong.

Remortgaging to try to take advantage of the low interest rates in a fixed term deal could also be a nightmare for you.

Remember, banks base their interest rates, in part on your LTV or loan to value rate. If your house has slipped into negative equity you may find yourself paying top dollar when it comes time to re mortgage.

In a slightly different take on things than groups I wrote about earlier in the week, Savills estate agency sees plenty of opportunities ahead for buy to let landlords.

They say that though the fall in house prices is not quite over it is likely to be far less dramatic than that which we have already experienced. They also point out that as we start the long climb back to recovery, buy to let landlords will have some excellent opportunities to profit.

Yolande Barnes, head of residential research, said: “In the medium to long term, the inability of first time buyers to raise deposits rather than the inability to afford mortgage repayments mean that they will remain excluded from entry to the market, boosting demand for private rental property and co-ownership or equity loan schemes.

“This presents a huge opportunity for investors in private rental stock. If acted upon this should, in turn, underpin the recovery.

This sounds very much like a win/win situation and at present any talk of one of those is very cheerful indeed. It certainly beats a situation where everyone loses and we have had our fair share of those recently.

They do point out that this recovery is likely to be a fairly slow process but still things are at least beginning to look up if they can be believed. Barnes had this cheerful thought to put to us.
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Stamp duty has always been very controversial. Most people believe that it causes havoc in the market by distorting it at the thresholds.

Every year the Council of Mortgage Lenders calls for reform to what must surely be seen as a flawed tax, but to date their calls have fallen on deaf ears. The government seems determined to keep the tax and therefore the revenue it brings them. This is despite other voices joining the call for reform.

Mortgage intermediary garoup the AMI point out that with reduced amounts of house sales this would be an ideal time to make change to this law. Considering the economic situation the government is in though, they are highly unlikely to relinquish their hold on the revenue that stamp duty tax brings them.

One suggestion that has been made that would both encourage new buyers into the market and allow the government to maintain their grip on the tax money they are so desperate for, is to change who pays the tax. If stamp duty was payable by sellers instead of buyers it would be revenue neutral but still encourage new people into the market. Continue reading →

With many people enjoying an unprecedented low mortgage rate this may sound like madness but according to a report in the Telegraph over the weekend the smart people may be ready to fix.

People who have come out of a fixed rate recently will be unable to believe their luck with the bank rate so low and many standard variable rates set at 3%. It is impossible to find a fixed rate deal that low so why on earth would you want to change?

Two reasons, according to the Telegraph. One your loan to value rate may soon be looking a lot worse if house prices continue to drop. This is a problem because lenders increase interest rates depending on your LTV rate. So if dropping house prices force you into say the 90% bracket, when you come to fix a mortgage you will be paying higher interest.
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Selling a house has always been a big and often stressful job but in the present market it is proving to be even more so.

Most people who want to buy are having trouble finding funding as banks crack down on who they will consider giving a mortgage to. Those people who can get funding are finding themselves in a position to be fussy about price and quality as sellers compete for their business.

Experts are suggesting that those people who want to be successful in shifting their house need to work out what its value was in 2007 and mark the price down roughly 25%.

Once that is done there are a few other things you can do to make your property stand out from the hoards of competition.
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Numis Securities, a city investment bank, has released figures that paint a very bleak picture for the housing market. They predict that the housing market which has already fallen 20% in the last 12 months could be set to plummet another 55%.

They put this dramatic predicted fall down to the fact that a lot of people who got into the buy-to-let market when it looked like a sure thing are now starting to panic as their investment loses them money. These people may flood the market and drag prices down even further.

Numis said: “It is the action of these amateur investors over the next few months which we are most concerned about,” the report says. “We expect some to begin panic selling their portfolios, with the peak volume as is almost always the case with private investors, being at the market trough.”

They are also very critical of the governments plan to force the banks to lend again at high levels. They cite the fact that huge level of debt appears to be one of the factors that drove this recession in the first place.

They save their most scathing criticism for the Prime Minister himself “Gordon Brown’s fingerprints are all over this economic wreckage and he should now have the decency to at least apologies for his mistakes.” Continue reading →

There is not a lot of good news on the house selling front this week. An article on the BBC website reported on Tuesday that the countries surveyors recorded the lowest house sales in 31 years.

The article does point out that in the last four consecutive months there has been a significant rise in people enquiring about buying into the property market. This is said to be because the public are starting to view houses as more affordable, unfortunately that does not seem to have translated into actual sales or at least not yet.

In more bad news the article reports that house builders are expecting to hit an 88 year low in actual construction of new houses. A 50% drop to 70 000 this financial year is certainly a kick in the pants for the already beleaguered building industry.

“After years of boom, the housebuilding industry is lurching towards bust,” said Ruth Davison, director of the National Housing Federation.
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This week Linton Chiswick in an article titled Buy-to-let is not dead, came to the interesting conclusion that ‘Buy-to-let’s not dead… it’s just in a funny shape.’. The article puts this down to the contradictory information that is available to evaluate the state of the market at the moment.

Some information indicates that tenants are now in the strongest position with market flooded with accidental landlords desperate to rent out their properties to cover their expenses.

Other statistics seem to show that with a huge fall in interest rates some landlords are in a stronger position than ever. It seems to me that it is a little hard to judge the state of things accurately at the moment. There is however another question the article posed which I believe is far more interesting.

Will this crisis mean that our attitudes to the desirability of owning our own homes will be changed forever? In the Western World we have been having what could be described as a love affair with property for some time now. Will the huge crash and the impact it has had on people put a stop to that? Continue reading →