I am always interested to gain insights into market activity. They allow us a wider perspective of the economic status quo and an opportunity to compare this with our own performance. The most recent snapshots I have been receiving however are quite out of the norm, sometimes confusing and often contradictory. This seems most prevalent with information relating the mortgage market.
I often feel a smile of disbelief widen across my face as I read an article boasting resurgence in lending. A headline such as ‘16% rise in mortgage lending’ can inject a dangerously overoptimistic confidence into the market, particularly for those who don’t want to delve that little bit deeper, because they daren’t face the alternative reality.
The fact is there will always be daily, weekly and monthly fluctuations; for example lending was 16% higher in June than it was in May – but still 3% lower than it was in June 2010! The long term direction remains the same – borrowing is tough, lending criteria is strict and it remains at around half of what it normally is in a settled market. It can’t possibly return to any where near normal levels until the bigger economic issues are settled.
UK economic growth is slow and below target and I am not aware of any strategy that has been implemented to inject a faster or more aggressive return to the ‘good times’. Outside the UK you don’t have to look far to find turmoil – the US debt is unimaginably large and their position increasingly fragile due their in-house political stand-off’s, Greece remain in a deep and spicy pickle and Italy look increasingly vulnerable; which in turn could dampen all our sparks of recovery.
So how does this affect property? Well if I were asked to bet, I would back tougher times ahead. There are still a number of economic factors still to rear their unpleasant heads (such as an interest rate rise) that can only dampen the market. Inflation is roaring making us all poorer, interest rate rises are looming, and redundancies are continuing, fuel costs are mounting and so on. These sorts of issues don’t usually lay the platform for a boom! Because of the banks strict lending approach, there are fewer and fewer mortgage approvals. This fact, alongside the increase in the number of properties for sale, will almost certainly result in downward pressure on prices.
Rightmove tell us that their latest vendor survey demonstrated that the majority of sellers are optimistic and most feel house prices are stable and may even go up. However, they also tell us that of all the properties listed as for sale on their site in 2011, 70% still remain unsold! Hope and reality clearly remain a long way apart.
Here’s my conclusion: There are still buyers out there and we are still selling properties. The recipe for success is simple – to out-compete this crowded market you really do need to present well, market wide and price competitively – or unfortunately you will drift slowly into the ever deepening sea of unsold homes.
