Experts view - What next for house prices?
Confidence in the housing market has strengthened from its record low at the end of last year, according to research by Zoopla.co.uk. The Telegraph asked a panel of economists and industry experts if they agree.
Simon Rubinsohn, chief economist at Royal Institution of Chartered Surveyors (RICS)
“I think that confidence has improved since the end of the year but it remains fragile and has a strong regional dimension. Confidence in London and the South East is more upbeat than in many other parts of the country, in particular parts of the Midlands and the North.
“Our headline forecast remain unchanged with prices projected to be 2pc lower in the last quarter of 2011 compared with the same period in 2010. However, there will be significant regional variation with London the only area to be slightly up.
“May still seems highly likely [for an interest rate rise] unless the activity takes a marked turn for the worse – with the ECB set to move this month and inflation continuing to push upwards it will prove difficult for the BOE to stick with its current position – however we only expect one more move this year taking the base rate to 1pc at end 2011 – there will be further tightening in 2012.”
Martin Ellis, head of housing economics at Halifax
“There are signs that both house prices and the level of sales have stabilised in the early part of 2011. This would be consistent with the evidence of improved confidence.
“Overall, we expect a modest 2pc decrease in house prices in 2011. Uncertainty over the economic outlook is likely to weigh down on housing demand this year.
“There is considerable uncertainty over the timing of the first interest rate rise. We expect it to be around the middle of the year but do not expect it to be followed quickly by further increases.”
Melanie Bien, director of independent mortgage broker Private Finance
“I find it surprising that confidence in the housing market has significantly risen since the end of last year. On the contrary, the soaring cost of living, fears over job losses and rising interest rates, seem to be making buyers and sellers sit on their hands and adopt a ‘wait and see’ attitude. The number of transactions is extremely low as a consequence.
“House prices are likely to remain flat at best this year but this national average will conceal significant regional differences. The north-south divide is set to become increasingly pronounced with prices rising in London and the south-east, particularly in the prime markets, while falling in the north, Scotland, Wales and Northern Ireland.
“Interest rates will start rising in the next few months but I believe this will now happen at the end of the summer – September, rather than May. The economy is simply too fragile and the impact would be so devastating for many home owners already struggling to make ends meet that I think a move will be delayed for as long as possible.”
Opinions are conflicting, but the general consensus seems to be that confidence in the market has strengthened since last year. Greene & Co. have experienced a positive end to the first quarter of the year and feel good about the year ahead.
Is now the right time to sell?
There are many conflicting reports on the future of the London property market. The 2011 Rightmove House Index Report shows the beginning of 2011 to be much the same as 2010 with a slight increase in the house prices in the London area. However The Guardian reported on Saturday that house prices are to fall by 20% over the next two years.
Smart vendors are contacting us now for valuations on their properties to have a good idea of where they stand in the market should they decide to sell before the market dips.
Homeowners should brace themselves for a “short, sharp shock”, with house prices set to fall by up to 20% over the next two years as rising unemployment and public spending cuts take their toll, experts are warning.
“Prices are trending slowly downwards at the moment, but our view is that this is really the start of the second leg of the correction, and we expect prices to fall significantly further,” said Paul Diggle, property economist at consultancy Capital Economics.
He calculates that the average home remains up to 20% overvalued by historical standards – and with the mortgage market still tight and unemployment rising, 2011 could bring prices crashing back to earth.
The impact of any downturn is likely to vary across the country. Miles Shipside of property website Rightmove said prices in each area would be driven by the fortunes of the local population, with the worst-hit places likely to be those where public sector layoffs are worst.
“Forced sales will be the issue, so it depends on the make-up of your area – the level of unemployment and financial hardship,” he said.
The gentle alarm has been sounded, and for those who are already pondering the idea of selling their property – now really might be the best time,
For more information contact your local Greene & Co.
Source
http://www.guardian.co.uk/money/2011/feb/19/house-price-fall-20-per-cent
Rising swap rates put pressure on fixed deals
A number of lenders have pulled their existing fixed rates as the cost of funding has gone up. Although the Base rate has today stayed at 0.5%, the conclusion that we can draw from this is that a rise will be happening sooner rather than later. For all your clients who are dithering about putting offers in, this is invaluable information as we could be coming to the end of historically cheap access to borrowing.
Rising swap rates put pressure on fixed deals
Recent increases in swap rates are starting to force up the price of fixed rate mortgages, say industry experts.
Since November 2010, two-year swap rates have increased from 1.31% to 1.72% and five-year swaps have gone from 2.18% to 2.82% in the same period.
Last week two-year swap rates were 1.62% and five-year swaps 2.75%.
David Hollingworth, director of communications at London & Country, says: “Swap rates have fluctuated over the last two years, but of late they have been on an upward trend.
“We have already seen evidence of lenders increasing their fixed rate mortgages because of swap rates and the sharper fixed deals are under threat.”
But Hollingworth adds that although swap rates play a part in lenders’ pricing they also look at other factors when setting fixed rates.
Alan Cleary, managing director of Precise Mortgages, says two-year swap rates have risen substantially in the past few months as a rise in the base rate looks more likely.
He says: “We are getting closer to a rate rise with every base rate decision and this is starting to affect the price of swap rates.
“Fixed rates, especially two-year rates, are on their way up and borrowers should look to fix now.”
Industry consultant Mehrdad Yousefi says high inflation is worrying the money markets and pushing up swap rates.
But he says: “Over the next four weeks fixed rate deals will cost more but it remains to be seen whether this will continue throughout the year.
“In the second half of the year when the base rate starts to rise, swap rates will start to predict the next base rate could start to rise and products will certainly become more expensive.”
Halifax raised the rates on its two-year fixes by 0.2% today and blamed the increased cost of funding and swap markets.
Interview with David Pollock
For an insider view on the current state of the property market take a look at this five minute interview with David Pollock, Managing Director of Greene & Co and Urban Spaces, to get his take on the market today. David talks about both Urban Spaces and Greene & Co, market changes, the use of portals and what makes Greene & Co different from other agencies.
