The property market is something that affects us all, be it buying and selling a house, to property investment. This blog is our take on the property market in Scotland in general, and Dundee and Angus in particular. To get in touch with us, please visit www.blackadders.co.uk.
I am delighted to advise that our 3rd Annual Property Sale is now bigger and better than ever with 57 properties taking part and with savings of up to £50,000 from Home Report valuations.
I think this initiative shows prospective purchasers the possible bargains that are out there and the fact that it is a great time to be buying. It also shows our innovative and pro-active approach to selling properties.
The past few days have seen a plethora of new stories regarding the above expected rise in the rate of inflation. There is now a feeling that the Bank of England may have to raise base rates sooner rather than later. I would urge the Bank of England to hold their nerve in respect of interest rates as I think that the inflation pressures have been caused mainly by the rise in raw materials and also the recent rise in VAT. I think it would be catastrophic for the fragile economy if the Bank of England started to raise interest rates now.
I note with interest that the swap rates have soared over the last few days on the growing possibility that the Bank of England will have to put up base rates. The knock on effect is that lenders are withdrawing competitive fixed price deals and replacing them with higher rates as the rates on the money market increase.
This is having a very damaging effect on the economy as a whole and on the housing market in particular.
I personally felt that the Bank of England were slow in cutting rates when the economic crisis started and I hope they will not to make matters worse by raising interest rates too early.
I was disappointed to read that the major banks and the Government have yet to reach agreement in terms of project Merlin, which is a plan to increase the availability of finance to small and medium businesses. I think that support of small and medium businesses is fundamental to getting the economy back on the right track. Given the furore over bankers’ pay and bonuses I would have thought the banks would have been more inclined to be more co-operative, although I do appreciate that there are some legal issues that need to be dealt with including the issues of lending to what might be described as weaker businesses.
I would urge both sides to work together and reach an agreement as quickly as possible to give small and medium businesses the funding they urgently require to survive and flourish in this difficult time.
I was interested to read a prediction by the Counsel of Mortgage Lenders that net mortgage lending this year is likely to be just £6 billion, the lowest annual total since 1980. Net lending is what borrowers actually owe their lenders after they have paid off some of the capital etc. This figure represents a fall of almost 95% from the £108 billion of net lending in 2007. This figure does point to the initial concerns regarding the housing market and shows inherent weaknesses. As I have mentioned in previous blogs, with no clear strategy from the Government in respect of the housing market, continuing economic uncertainty and job insecurity, people are less inclined to move house. Coupled with that you have the problems that first time buyers have in getting on the ladder then there is a real problem of a stagnating house market.
I will continue to monitor matters and keep you updated.
I heard with interest that Barratts have launched a First Time Buyer Scheme. The scheme allows first time buyer’s parents to borrow 15% of the purchase price on an unsecured loan basis with a fixed rate of 5.4% and run for up to 12 years. The scheme has no early repayment charges and a limited overpayment will be allowed penalty free. This will enable first time buyers to have a mortgage of 80%, put down a 5% deposit with the remaining 15% funded by the parents through a loan from Hitachi.
As I have mentioned before, first time buyers have been badly hit in this economic downturn and the average age of a first time buyer is now 37.
I am in discussion with a national builder with development sites in Scotland to see if they would be in a position to offer something similar and I shall let you know as soon as I have some more information to report.
I was delighted to read in the Dundee Courier about the £4.8 million pledge received from the Scottish Government. This would appear to be a key piece of the jigsaw and a catalyst for taking the V & A in Dundee to the next stage.
As readers of previous posts will know (14 October 2010), I think the importance of the V & A to the Scottish economy in general and Dundee economy in particular will be huge, and that the venue will go a long way to enhancing Dundee’s reputation as a leading UK city. The knock-on effect for the property market will be more visitors, more purchasers, more people realising the huge untapped potential of Dundee.
I would urge everyone to support the V & A project and work together to ensure that it happens.
Although I am against the sensationalist aspects relating to house price surveys (the most recent conducted by the Halifax) I was interested to note that they expect limited movement in house prices during 2011 as interest rates are likely to remain low for some time. They also pinpointed a reluctance to sell from some homeowners, this halting a decline in prices.
I do agree with this sentiment and am firmly of the view that house prices will remain stable during the course of 2011. However, I don’t think it will be any easier to sell your property and would therefore emphasize the importance of getting an experienced solicitor estate agency to sell your property. On the other hand, I don’t think that there will be many bargains around and again when purchasing, speak to a property specialist to ensure that you are buying a property for the best possible price that you can.
2011 will be a very interesting year for the housing market!
I have heard with interest a rumour, nothing more than a rumour, that the Scottish Government is now actively reconsidering their position on Home Reports in light of the withdrawal of the deferred payment facility by Close Brothers. My understanding is that they are considering temporarily withdrawing the Home Report to give the property market a welcome boost and also to assist financially disadvantaged sellers.
I would strongly welcome this move – I will let you know should I hear anything further.
I would add that currently, as previously mentioned (see 10 December 2010 post), I have been in communication with a number of surveying firms who have advised me that they will either have their own deferred payment scheme or would look favourably on any request for a deferred payment report.
Is 2011 going to be the year that the green shoots start turning into something more substantial or when the light at the end of the tunnel turns out to be a train heading towards us?
I thought that the best way of dealing with my predictions for 2011 was to start with a review of the property market for 2010. The start of 2010 was anticipated to carry on a continuing upward trajectory just as 2009 had finished. This was slightly slowed down by the bad weather at the tail end of December 2009 and the start of January 2010, causing a slight dip in transactions in February. In general, between February and September, houses coming on to the market exceeded expectations and were on average about 20% higher than 2009. I would refer you to my blog of 10 November 2010 which included the graph from the Registers of Scotland showing the volume of residential sales over a number of years. In September, as you will see from the graph, the number of transactions dipped below 2009 levels. The figures for Dundee and Angus were slightly stronger and kept above line figures until November. The early snow at the end of November certainly curtailed market activity and this, linked with a number of negative press articles and a general feeling of economic uncertainty, caused the figures to dip further with market activity for December being about 20% less than December 2009. My feeling is that house prices did not show any remarkable drop and were relatively stable for 2010, however the caveat to this being that if you bought in 2007 the market has not yet reached those levels and also sellers in general are becoming more realistic regarding an achievable price for the property.
Now onto 2011.
My feeling is that with a lingering Christmas hangover, continuing economic uncertainty and the Government debt reduction plans starting to have an impact – including the VAT increase, the rise in fuel costs, the National Insurance increase and the public sector spending cuts – that the first three months of 2011 will see property activity levels below those of 2010, coming in at around 2009 levels. I would anticipate a slight pick-up in the second quarter with 2010 levels being reached by the end of June. Thereafter I would be expecting a strong last six months with 2011 ending on an upbeat note. Again, I would anticipate prices remaining relatively stable during the course of 2011.
Issues to look out for range from simply the weather to the sovereign debt crisis which shows the impact of globalisation when the Scottish housing market can be affected by potential problems in Portugal, Greece, Spain and Ireland. There is the question of the banks’ lending policies – if there is not significant support given by the banks to the property market then recovery will stall further.
My wishes for 2011:-
Home Reports being abolished or at least temporarily suspended
Tax breaks for property investors – through pension legislation
Government assistance for first time buyers
Tax breaks for the construction industry
Government pressure put on lenders to increase mortgage lending and lending to small businesses
I have long been of the view that a strong housing market is essential to the UK economy and I would urge both Scottish and UK Governments to take all the steps possible to bolster the housing market for 2011.
Finally, I take this opportunity to wish all the readers of this blog a happy and prosperous New Year.
I welcome the comments by the Head of the National Association of Estate Agents voicing his concerns regarding the Mortgage Market Review (MMR). Readers of this blog will know that for the past 18 months I have advocated strongly for Government action and support to force lenders to increase the amount of lending to enable all prospective purchasers and first time buyers in particular to get onto the housing market. If the current proposed restrictions are applied, more than 150,000 purchases each year will not take place and this will hit first time buyers heavily. This will have a huge knock on effect. I will keep you updated in respect of these proposals.
Since writing this blog, Prime Minister, David Cameron has now spoken out against plans to clamp down even further on mortgages in the name of responsible lending. Mr Cameron had indicated that lenders have already gone too far in preventing good risk buyers from accessing mortgages.
The Housing Minister Grant Shapps, who is due to meet the FSA during the course of this week in respect of the MMR proposals, has himself indicated that he would have failed to get a mortgage under the new proposals.
I am delighted that the Prime Minister and the Coalition Government are taking this matter so seriously as the housing market is fundamental to the whole economy.