Cautiously Optimistic Report from Council of Mortgage Lenders

It was interesting to read the report from the CML advising that mortgage lending rose by 4% last month and by 21% on April last year.  I would however  offer a slight note of caution when comparing year on year as there was a big drop off in April 2012 due to the end of the Stamp Duty holiday on the 31 March 2012.  However, there is no getting away from the underlying trend that April is one of the strongest months for lending activity since 2008.

The cautiously optimistic view certainly chimes with my opinion and I think that 2013 should show a slow but steady improvement.  The only caveats to that are the usual ones in relation to an unexpected development in Europe or another economic crisis – I am concerned regarding the surge in the FTSE and other Stock Markets around the world which is being fuelled by cheap money rather than reflecting improving economic conditions.  What happens when the life support system of quantitative easing is turned off? – I will cover this in a future blog.

There have also been some interesting announcements from the Scottish Government in relation to their support for the housing market, both through rent to buy and a mortgage guarantee scheme – I am delighted that both UK and Scottish Governments have woken up to the importance of the housing market to the economy as a whole. As mentioned in previous blogs, my hope is that these schemes will stabilise the housing market and encourage banks to start funding residential developments.

Lindsay Darroch
Partner & Head of Property

First Time Buyer Activity Increases

I was interested to read a report from the Council of Mortgage Lenders advising that the first quarter of 2013 sees strong first time buyer activity.  According to the CML,  first time buyers in March accounted for 45% of all house purchase loans.   As readers of previous blogs will know a healthy property market needs first time buyer activity to be in excess of 40% so this is a very positive development.

The average loan to value ratio for first time buyers remains at 80% but there has been an increase in the proportion of first time buyers taking out loans with a deposit of 10% or less.  These figures are very positive but I strongly warn against complacency.  The overall market volumes are historically still very low and while the percentages are moving in the right direction the volumes are not – there were 19,100 loans advanced to first time buyers in March 2013 compared to 24,400 loans advanced in March 2012.  This is not a surprise as March 2012 marked the end of first time buyers Stamp Duty holiday which resulted in a significant spike however it does show that a sustained recovery in the property market is still some way off.  I am anticipating that the recent schemes announced in the budget will start having more of an impact.

It was also interesting to note that the National Association of Estate Agents and the RICS both had slightly different takes on the market.  I still stick by my original predictions that the second half of 2013 will see a strong improvement in the housing market – fingers crossed!

Lindsay Darroch
Partner & Head of Property

Mixed Messages – Property Market

I was interested to read that the Government’s announcement regarding the new Help to Buy initiative has had an immediate positive impact on the market leading to an increase in new buyer enquiries according to the RICS (Royal Institute of Chartered Surveyors) Residential Market Survey. The RICS have advised that all the key indicators show some improvement in April in the housing market.

In relation to Blackadders’ own figures for April, I am pleased to advise that last month was one of our best ever months for house sales with under offers,  exceeding target by 30%.  Interestingly listings are only slightly up compared to last year and the data I have seen indicates that new properties coming on to the Scottish housing market may actually be slightly down for the first four months of 2013.  This is shown by a slight reduction in second-hand stock levels throughout the Scottish property market.

As I have previously indicated, my hope is that market sentiment continues to improve with more people putting their properties on the market and selling them.  Once the full impact of the Government schemes are known, which we should start to see in January 2014, we will hopefully see an increase in the number of first time buyers coming into the market, taking up some of the excess stock that is particularly prevalent in the lower ends of the market.  There is a requirement on banks to start lending money to property developers to enable the housing shortage to be dealt with and I would urge the Government to look at various schemes to help the construction industry which is so fundamental to the UK economy as a whole.

I will continue to report on trends and hope that the data will become a bit clearer over the next couple of months.

Lindsay Darroch
Partner and Head of Property