News

Rics predicts 2008 housing market

Thursday 20th December 2007

The Royal Institution of Chartered Surveyors (Rics) has predicted that house prices will remain broadly unchanged in 2008 but acknowledged that the market could face short-term weaknesses.

Following the Bank of England's intent to counter any threat to the economy by cutting interest rates, Rics does not believe that a drop in house prices will go on for long.

But the organisation predicted a rise in repossessions from 30,000 to 45,000 although it noted that these figures were not as significant as the levels seen in the early 1990s.

First-time buyers were predicted to have a good year as Rics saw chances for them to capitalise on a market with strong employment conditions.

Simon Rubinsohn, chief economist at Rics, said: "2008 will prove a difficult year for the housing market, but with falls likely in the base rate, the housing market should be provided with a stable platform.

"However, the employment picture should remain firm throughout the year, helping to prevent significant numbers of repossessions and the subsequent influx of supply into the market. This should ensure that house price growth remains broadly flat over the course of the year."

Cut in interest rate is welcomed by mortgage market

Friday 7th December 2007

The Bank of England has reduced interest rates by 0.25 per cent to 5.5 per cent and the cuts have come as no surprise to the mortgage market.

Richard Farr, director of the Association of Mortgage Intermediaries, said: "It's not a great surprise that the Bank of England has reduced the interest rate, but it is interesting that it has done so in December.

"What is important is that this early cut will provide a timely boost to the market and although it will not bring investors flooding back into the market to ease the 'liquidity crunch' it is certainly a step in the right direction," he added.

Ray Boulger, of John Charcol, agreed that the cut was a good start but predicted that lenders were unlikely to pass the cut onto borrowers.

Meanwhile, Michael Coogan, director general of the Council of Mortgage Lenders (CML), said the reduction would benefit consumers.

"This will reduce the risk of payment shock for the 1.4 million borrowers coming off fixed rates in the next year. However, we still need the authorities to intervene more aggressively to open wholesale funding markets. There is a real need to minimise the shortfall between the demand for mortgages and lenders' capacity to supply them," he added.

More than half of all buy-to-let investors expect to increase their portfolios over the coming 12 months, according to the latest Association of Residential Letting Agents (ARLA) quarterly review and index.

In addition, 90% of investment landlords said they would not sell, should house prices fall. However, if mortgage interest ceased to be an allowable business expense, more than four out of ten (42%) said they were uncertain what they would do.

Ian Potter, operations manager at ARLA, commented: “With the institutions less interested in the private rented sector and private equity companies not filling the gap, the loss of any private individual investors would seriously affect the rental market and severely curtail choice in housing.”

Government targets FTBs with new proposals

Councils could offer thousands of affordable housing deals to help key workers and first-time buyers onto the property ladder following proposals from the Government. Under the proposals to be piloted, councils would provide their surplus public sector land to Local Housing Companies (LHC). The local authority would then play a full part in agreeing the development plan for the land, including being able to directly offer low cost housing deals to meet local needs. The Government claims each LHC could deliver up to 1,000 new homes. Housing Minister Yvette Cooper said: "We urgently need to build more homes for first time buyers and families. That is why we are investing £10.2bn to increase affordable and social housing. But Government cannot deliver this alone. This is a new way to help councils to do their bit to support new homes for key workers and families in their areas."