Bank mortgage approvals

I was concerned to hear that the number of mortgages for home buyers fell in August for the third month in a row. Demand for mortgages continues to be weak despite more properties coming on the market. Currently in Dundee and Angus there are 20% more properties coming on the market than there are sales. This is a concerning trend.

My view is that with the economic uncertainty and banks still showing an unwillingness to lend, there are a few more bumps on the road to economic and housing market recovery.

My watch word for this current time is uncertain and this re-enforces to me the importance of anyone contemplating getting involved in the property market taking the correct legal advice from solicitors with property experience.

Dundee’s buy to let investment opportunities

A recent survey by LSL Property Services reported that average rents in the UK have reached their highest level for 2 years, a statistic which matches my experience of the Dundee and Angus property market.

Mortgage funding for first time buyers continues to be difficult to come by, meanwhile parents are becoming less able to fund deposits of their children’s first property, the result is there are increasing numbers of people who are looking to lease property instead. A number of local property managers have indicated to me that they cannot get enough properties to meet the demand.

Readers of previous blogs will know my feeling that Dundee is a prime area for buy to let property investment and I am of the view that with the correct advice a buy to let investment can provide significant income return as well as the potential for capital appreciation. Whilst funding for buy to let investments, like all types of mortgage, is harder to come by, I was pleased to see a couple of new products coming into the market.

The fact that Dundee is a university city with a high tenant demand and comparatively low entry prices, means that it could once again be poised to reclaim its title of buy to let investment capital.

Help needed urgently for first time buyers

With house prices at very attractive levels compared to valuation and extremely low interest rates you would think that this would be an ideal time for first time buyers to enter into the market.  However, due to constrictions with lending and a degree of economic uncertainty there has been a dearth of first time buyers over the last few months.

A report from Right Move indicated that first time buyer activity was 12% less than this time last year.  Given the chain nature of the housing market no matter what you are selling, be it a traditional first time buyer property or a £500,000 mansion, everyone involved in the housing market is affected by the lack of first time buyers.  I would also suggest that unless a degree of stability and security can be brought into the housing market then banks which have securitised most of their debts against these housing assets will not feel confident.  If the banks aren’t confident then they will not feel comfortable increasing their lending, and without increasing lending the economy will not be stabilised, thus a potentially damaging circle of events occurs.

I have already asked in this blog for the Government to pay more attention to the housing market and in particular first time buyers – and I repeat this plea.  It is my view that the Government could enter into a very simple agreement with the majority of lenders, asking them to lend 95% of loan to value with the Government guaranteeing 5% of the loan for first time buyers.  The definition of first time buyer has now been brought into legislation via the emergency Budget.  Given that it is a guarantee then it only becomes a cost to the Government should the loan go bad.  The Government could limit this pot to a certain level and this extra expenditure could be funded from very simple changes to Capital Gains Tax dealing with particular people buying and selling non main residences within say a seven year period.

More action is required by the Government and first time buyers urgently need more help. This would stabilise the housing market and improve the general economy.

P.S. Since this article was written I was pleased to see that a lender has recently introduced a 95% product for first time buyers at a reasonable rate which required a guarantee from parents or grandparents. Whilst this does not go as far as a Government backed scheme it is certainly a welcome step in the right direction.

The housing market – home or away?

I have been reading with interest the various reports that have come out in the last few weeks detailing the state of the Scottish housing market. All with the exception of a report from the Daily Express have been full of doom and gloom, indicating house price falls and activity levels down.

As I mentioned in a previous post, it is always important to treat house price reports with a degree of caution, particularly at this time of year. Whilst the housing market is not as seasonal as it once was, there is no doubt that in general you see an uplift in activity at the end of February which slightly dips with the school holidays in April. There then tends to be a peak in June with activity levels dropping for July and the middle of August. There is then the autumn surge which usually comes round about the end of August with the schools going back from the summer holidays and then there tends to be a surge at the end of December as people try to get into their properties before Christmas.

My experience for July 2010 is that there has been a higher than expected level of properties coming on to the market, coupled with the usual quietening down of the number of purchasers which is to be expected for this time of year. I think the end of August will be a telling time at which point we will be able to decide if the increase in market activity will continue or if we will get the slow down as expected.

Figures from the Registers of Scotland indicate that on average activity in the Scottish market is between 10% and 20% up on a month to month basis. My feeling is that for the rest of 2010 we will see activity levels much closer to 2009 levels with house prices remaining stable. I will keep you up-to-date as soon as more information becomes available.