Will property sales rise over coming months?
There is little doubt that the past year has been a shocking one in the housing and mortgage sector, and the lack of mortgages and tighter credit conditions that have stemmed from the global credit crunch have had a severe knock on effect on the house market.
Not only have property prices been tumbling but the level of property sales has gone through the floor, and many estate agents were forced to close their doors for good last year because they simply weren’t selling any properties.
Many people thought that the drop in house prices would mean that more properties would be selling, as first time buyers took advantage of the lower property prices. However, this particular group, which normally keeps the housing market buoyant, was unable to keep things afloat because many could not get the finance needed to purchase a property. The global credit crunch led to lenders really tightening up on their lending criteria, and with lenders not prepared to take unnecessary risks many first time buyers were unable to get finance.
In addition to this lenders hiked up the amount of deposit required to get a competitive mortgage, and with many first time buyers having little in the way of savings and nothing by way of equity this was another problem that affected the ability of first time buyers to get onto the property ladder, resulting in many homes being left festering on the market. However, one bit of light at the end of the tunnel is the startling reduction in the base rate over recent months, which industry officials say has resulted in renewed interest in the housing market.
Officials from the Royal Institute of Chartered Surveyors have claimed that a higher number of enquiries from would be buyers has indicated that there has been renewed interest in the housing market, and this is largely down to the fact that in addition to house prices being far lower than a year ago the interest rate is now at its lowest in the three hundred and fifteen year history of the Bank of England, encouraging buyers to take more of an interest in the market. However, RICS did also state that the majority of interest was from those that already had a flat or house, and that first time buyers were still struggling to try and get on the property ladder because of the ongoing restrictions in the mortgage market.
RICS has high hopes for the property market on the back of the increased interest in the market, and thinks that over the coming months the number of property sales could continue to rise. Some lenders are offering some very competitive deals on mortgages, but in most cases these are only made available to those that have a deposit of at least 25 percent and more often than not 40 percent, which means that only those with plenty of cash or those with high levels of equity in their existing property can access these deals.
An economist from RICS stated: “Interest from owner-occupiers is likely to persist over the comings months as those with large deposits look to capitalise on the drop in house prices.”
He also said: “Our suspicion is that this improvement in activity levels is likely to be sustained over the coming months; mortgage approvals could climb above 35,000 [per month] on the back of the higher level of buyer interest. However, this would still be well down on the high for the cycle as well as being significantly below the long run average. By no means could this relatively small pick-up in transactions be seen as representing a move back to a more orderly housing market.”
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