Is there really stability in house prices?

DanAronG · Joined: 17 Oct 2008 Posts: 103

Is there really stability in house prices or is it actually just the higher level houses that are supporting the market?

It was only a matter of time before house prices eventually would be supported by quantitative easing and lower interest rates. The Bank of England have not made the same mistake as last time and were aggressive in their monetary policy which has clearly had an impact on the confidence levels of the homeowner.

The news that across the UK house prices have found a support level will be welcomed. This will allow lenders to begin increasing the level at which they lend and to relax the extortionate rates they are charging for homeowners with higher loan to values.

Despite what most people might think, the prices are not being supported at the higher end. In fact it's quite the reverse. Detached and semi detached properties reported a fall in the most recent figures and it was the properties most attractive to first time buyers that proved the winners. In fact the properties in categories such as flats and maisonettes were indeed the biggest winners rising near 1% in June alone. I suspect these numbers matched our enthusiasm in this column in May when we could see that confidence was making its way through to the enquiry levels for new mortgages which we reported as the highest level in history, in fact higher than the peak of the housing market.

Much of this would have been a surprise given what house prices should get to. At the peak of the market I said house prices would fall, and fall to the first point I stated house prices were expensive, and that was 2003. Quantitative easing and amazingly low interest rates look to have halted the house price just before then with prices now turning at April 2004 levels.(1)

Will it be sustained? There are two key factors: First time buyers in rented accommodation and investors.

The fact is many first time buyers and investors will be looking at today's interest rates and realising they are potentially missing an opportunity. The cost of rent is considerably more than the cost of a mortgage and many first time buyers will seek this opportunity to dive into the market at 2004 levels. This is just as evident in the
mortgage enquiry levels reported for June.

Investors who like property will try to 'time the market' but at the same time will be mindful their capital in the building society is returning nothing. There is never a bell rung at the bottom of the market but if ever there was a noise just like it, it is there now.

The Bank of England's policy appears to be working. If you also remember back to my column in November 2008 where I explained that fiscal policy takes eighteen months to fully make its way through, everything appears to be going according to plan. Mr Brown is eight months into this campaign and in ten months he will have an election! Work it out.

One of the greatest benefits of investing into property is the ability to use someone else's money to invest. Unlike cash investments such as equities, an investor can gear into a property by borrowing from a lender, something only really available to a sophisticated investor in shares.

If this confidence bites after the summer lull, we could easily see May 2009 as the low point in the housing market.

In the meantime we would encourage readers to approach their mortgage broker to consider the benefits of fixing their mortgage considering the considerable hike in the cost of fixed money and the drive in mortgage enquiries. A support for house prices will support confidence, which in turn will make its way through to increased spending and good old inflation. It might be a strong decision to fix now when you are on a low standard variable but if quantitative easing has its true effect; higher interest rates will be on their way.

juliasmith · Joined: 18 Aug 2009 Posts: 2

i heard that the year 2011 is going to me more stable for property dealing. am also planning to invest but delyed that plan for a while

jimb12345 · Joined: 24 Jun 2009 Posts: 55

i think the prices have hit a bottom. I heard by next spring the prices will be good and you can start selling your homes.

EricJ · Joined: 09 Jan 2009 Posts: 321 Location: New Jersey

I would not bet on this being the bottom. Take a look at this article I posted...

http://www.dreamhomefinancing.com/mortagetrends.aspx

mkreech · Joined: 10 Sep 2009 Posts: 5

thanks ericJ for sharing that's a good share.. you have good pints there.. 8)

konnor aiden · Joined: 14 Sep 2009 Posts: 18

They have gone up in the last few months but many see this as only temporary, when interest rates rise its going to put a huge spanner in the works, it really annoys me why the media make out that high house prices are a good thing it, just means there going to be a generation of home owners burdened with enormous debt, they need to become more affordable, but if an estate agent say the 'bottom' has been reached it must be true an estate agent would never lie would they?..........yeah right

mkreech · Joined: 10 Sep 2009 Posts: 5

whenever there are topics like this the what so called 'recession thing' slips to my mind.. and i want that view to be totally erased in my thoughts..

EricJ · Joined: 09 Jan 2009 Posts: 321 Location: New Jersey

mkreech

with the help of a prescription, you can forget just about everything

Nikhil · Joined: 23 Sep 2009 Posts: 8

It is true, the slight rise we have seen is unlikely to be enough to bring the sellers out in their droves.