Entries Tagged 'housing' ↓

Amidst all the talk of falling house prices, it is easy to forget that there is a shortage of new housing starts in the UK.

Recently, the Government’s key adviser on housebuilding, Steve Nickell expressed his concern about the disappointing level of new houses being built in the UK. Steve Nickell who chairs the government backed National housing and Planning Unit NHPAU, used to a be a member of the Bank of England policymaker committee.

In 2007, the number of new housing starts fell to just 166,820 new homes. This is a decrease of 11% on 2006.

Government’s Target for New Housing

Gordon Brown has made a promise to build 3 million new homes by 2020. This involves an annual rate of just under 250,000 a year. However, it is not clear where this extra houses are going to be built. At the current rate there is a shortfall of 70,000 houses a year. Currently, planning permissions for new houses is quite strict. There is the usual problem that people want new houses to be built, but, just not ‘in my backyard’

One guaranteed way for an increase in home building is for the government to restart a programme of building council funded houses. But, currently there seems little political will to make this investment.

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Home reversion schemes and plans allow homeowners to tap into the value of their house and live in it until their death.

A home reversion scheme means that you sell your house, usually at a discount to an equity release firm. In return they allow you to:

• Live in the home until your death.
• Give a % of the equity in the house, that you can use for your retirement.

At death, the house is sold to reimburse the lender, the remainder of the cash is then distributed to the heirs in the will.

The advantage of Home Reversion schemes

1. Low risk way to borrow money
2. Home value is secured.
3. Attractive in periods of falling house prices or stagnant house prices
4. You can choose between a lump sum and an annual income

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The recent gains in house prices over the past decade may indicate that the prospects for investors in the UK property market are pretty meagre. In fact some would argue investing in the UK property market would be a bad move because they are now overvalued and are set for a price correction. However, despite the most pessimistic house price predictions there are some reasons to indicate investing in the UK property market may be a good long term move.

Advantages of Investing in UK Property

1. The ratio of house price to incomes has increase, but, it is not completely unsustainable.
   Lower long term interest rates. Since independence of the Bank of England average base rates have been lower making borrowing relatively cheaper than previous decades. In the foreseeable future we are likely to see the continuation of low nominal interest rates
2. Historical Gains in the housing market. According to Nationwide statistics UK property prices have increased by 9.28% since 1953. This increase offers better returns than savings in a bank and investing in the stock market
3. Shortage of Supply. Although temporary demand side factors may reduce house price growth. Long term factors suggest the UK will continue to experience a shortage of supply. This will push up long term prices of homes in the UK Continue reading →

With house prices on both sides of the Atlantic falling, those wishing to sell their house are placed in a more difficult situation. Although, it is currently a buyers market there are some tactics that can be used to maximise your selling price.

Choose Right Valuation.

Just because house prices are falling, don’t despair and set a price that is undervalued. At the same time, avoid being greedy and setting a price that is too high. Take several valuations and choose one in the middle. You need to choose a fair price which will encourage others to come and view. If you get enough people viewing the competition may push up the prices.

Compare with Similar Properties.

The housing Market can be a highly localised affair. Sometimes, even though national house prices may be falling, certain areas can hold their value. Even, within one large city, house price valuations may be moving in different directions. Therefore, it is important to get an idea of the local market. To get a real feel for the local property market, take time visiting estate agents and even visit other houses on sale. Look at the valuation placed on other houses and judge a competitive price for your own. Looking at other properties will also give you a good idea about what works well for selling houses and what puts a prospective buyer off.

Increase Value of Your Own House as Much As Possible.

There are several things we can do to increase the selling value of the house. Many of these are common sense, but it can be surprising how many homeowners don’t take advantage of them. Continue reading →

As the saying goes - There are lies, damned lies and statistics.

It seems that there are no end of statistics about the housing market, some of which can seem a bit contradictory.

At the moment there is a general assumption that UK House prices are set to fall and are vastly overpriced. However, before you rush out to sell your house, there are a few things worth bearing in mind.

1. House prices are not significantly above long term average compared to earning.

Graph of House Price Affordability 

• I should point out that this graph finishes in 2005, and since 2005 house prices have increased considerably. Therefore the ratio of house affordability is higher than this graph shows.
• If you had chosen 1995 as the starting point of the graph, of course, things would look a lot different, (in 1995 the affordability of housing was at an all time low) Even since 2003, there has been a considerable increase in the ratio of house prices to earnings. (See ratio of mortgage costs to earnings for first time buyers)
• However, compared to the peak in 1990 house price affordability is not that bad.

Why are House Prices Still Affordable despite House prices doubling in the past 5 years.

There are two factors which determine the cost of buying a house.

1. The actual house price
2. Interest rates, which will determine the monthly repayments. Continue reading →

The UK housing market is very significant for both the economy and the general population. Housing is the biggest form of wealth and also the biggest cause for financial difficulties. In the recent housing boom there have been clear winners, but, there have also been clear losers. These are my recommendations for a more equitable and efficient housing market.

More Flexibility in Supply

Increasing supply of houses, especially in property hotspot areas is important for dealing with the fundamental imbalance between supply and demand. Greater flexibility would prevent future rapid house growth caused by a bottleneck in supply. Admittedly increasing supply is easier said than done. However, I believe the government should take the initiative in building good quality council homes. - for either sale or renting to low income households.

Deal with Scandal of Empty Houses.

It is estimated that there are nearly estimates that there are 840,000 empty homes in the UK ( Empty Homes Agency) The National Land Use Database figures suggest there could be a further 420,000 homes in commercial properties. Making use of empty homes would go along way to relieving the shortage of supply, without the environmental costs of building in green belt land. (Why are they empty?)

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Buying a house can be one of the most stressful events that people take part in. Unfortunately, there is no guaranteed time to complete the process of buying a house; it will depend upon many factors. However, if you are lucky and things go smoothly then it may go through in 5 weeks time from putting in an offer to completion.

Time to Buy A House

Pre offer Stage - Looking around for properties and putting in offers. This period can take several weeks. It is best not to rush it, but also, it is best not to endlessly wait for the ‘perfect house’ This period is also a good time to arrange a mortgage, so it can be put into place when you buy.

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The law now requires homesellers to have a home information pack HIP when selling your house. From 14th December you can have one in the pipe line but that wouldn’t impress me as a buyer. From June you will have to have one from when you start marketing so here are some quick tips.

Quick Tips For Home Information Packs

• Make the HIP part of your sales process so it should be professional and give confidence.
• Consider a strong brand to supply the HIP – a recognised name would be more appropriate than ‘Forced to do it flashy Hip Co Ltd’
• If your estate agent or mortgage provider offers a ‘free Hip’ make sure you understand all the terms and get out clauses. There are so many ups and downs with house sales it is best to be prepared
• Also be prepared for suppliers to use the Hip to advertise there services with logos etc. Continue reading →

Despite the prospect of falling UK house prices, there remains some good news for Buy to Let tenants. Average rents are continuing to rise, buoyed by rising demand.

A key factor in the rising demand for rentable properties is the growth in immigration, especially from Eastern Europe. This means that with rising demand, the price of renting has continued to rise. According to Mortgage lender, Paragon Average rents were £11,066. This represents an annual increase of 10.2 per cent.

The rise in demand is not being met by a rise in supply. This is due to the general shortage of houses, but, also the reluctance of buy to let investors to increase investment in a potentially falling  property market. Therefore, a drop in UK house prices may not be matched by a fall in renting prices.

Sub Prime Buy to Let 

A problem looming on the horizon for many sub prime buy to let investors is the fact that many banks have reduced the range and scope of sub prime mortgages. The definition for a sub prime mortgage is anyone who has a record of mortgage defaulting, resulting in a CCJ (County Court Judgement). Because less sub prime mortgages are available, many buy to let investors will be forced to take out more expensive SVR loans, when their mortgage term expires. This gives buy to let investors another reason to sell.

see: Buy to let landlords fear they may have to sell 

Nationwide Building Society released their latest figures from the state of the UK Housing Market. These statistics suggest that house prices fell by 0.8%. It is the largest monthly drop since June 1995

Combined with other statistics and reports, it shows there has been a fundamental shift in the prospects of the UK housing market.

There is increased expectation that interest rates may be cut soon. One of the members of the Bank of England Monetary Policy Committee Mr Blanchflower has expressed his concern at the state of the UK economy. He is the strongest voice for lower interest rates.

Yesterday, Mr Blanchflower, was in Birmingham stating that the worst was yet to come for house prices and the housing market. - UK House prices set to drop (at icBirmingham)

However,

The title of this post is slightly misleading. Monthly changes in house prices can be volatile. House prices are still higher than this time last year. see this post:

• Are House Prices falling?- a guide to the complexities of the housing market statistics

Also, are falling House prices a bad thing?

Yesterday, I wrote that 2008 can still be a good time to buy a house 

The Independent expressed similar sentiments in their article on the housing market here