14 October 2008
Banking package is good news but lets see action from the banks on mortgages
The Government’s announcement yesterday regarding the package of assistance being given to Banks should bring about some confidence in the economy. It is important that everything possible is done to help stabilise the housing markets in this respect.
The Government’s requirement that the assistance should help the supply of home loans will help to bring about increased liquidity for homebuyers and will help to get housing markets moving again. In particular this is important because housebuilders need to see a stabilisation of house prices before they will increase the production of new homes.
The number of starts has fallen off significantly in the past year and is now well below that required to meet the Government’s housing targets. I’m very hopeful that yesterday’s announcements will lead to an improvement in the supply of home loans. However, we wait to see what mechanism is to be introduced to ensure that the banks fulfil this important requirement and we will be watching with interest as our purchasers apply for mortgage funding.
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4 September 2008
The consequences for housing supply
The odd thing for some people to understand is that the underlying need for more housing in the UK is not in dispute. If we look at the number of homes physically available and consider the number of households wanting their own home, there is a significant shortage.
In response to the downturn in the housing markets and concerns about achieving sales, housebuilders have cut production through slowing down their construction programmes and deferred starting on some sites in certain areas. As a consequence the number of homes likely to be built in Britain this year and next will be significantly below requirements and far short of Government targets.
The result is that as and when the housing markets improve, as they inevitably will, there will be even fewer homes available to satisfy demand. Therefore particularly for people who are trading up the period ahead will be a good time to consider buying. While you will be selling your existing property into a weak market and achieving a lower selling price than you may have been hoping for, you will also be buying a property at a higher price but not as high as you may previously have been expecting to pay. Thus for those trading up there is now a window of opportunity to do a good deal where the price differential will be in your favour.
What is for sure is that there is a greater appreciation than ever of the importance of housing to the wider economy. Weaker housing markets and falling prices have an impact on people’s confidence and as a result many feel less wealthy and reduce their spending on non-essential items.
It is now critical for the Government and the financial institutions to take action to stimulate home loan supply and thus the housing markets. The booms and busts that have been experienced in the past have been unwelcome and we must hope that we can return to more steady housing markets. However, as we have seen in the past, getting away from this divisive cycle is not easily achieved.
The current experience is having a severe impact on housebuilders who must adjust to the changing conditions. Unfortunately many hardworking and skilled workers in the industry are being made redundant which in itself is not good for the economy, let alone the people affected. A return to better times is therefore in everyone’s interests. However, there may be a little more pain to be experienced before an upturn is likely.
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