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Economy

Housing industry dire

Written by Gary Howes

Wednesday, 23 July 2008

Latest Bank of England reports show housing suffering.

The news is published in the Bank of Englands “Agents' Summary of Business Conditions” report for July. The Bank of England has Agencies across Britain who provide reports on the state of the economy to the Bank.

Housing Market

According to the report housing demand continued to contract at a rapid pace. Many contacts judged that the level of activity was currently more depressed than during the early 1990s.

However the number of repossessions remained low. In the market for established homes more transactions were falling through, with some estate agents reporting a cancellation rate of up to 40% recently.

Further findings of the report show that an increasing number of potential buyers have had their mortgage offers withdrawn, or had pulled out of transactions due to fears of capital losses.

Both of these factors were exacerbated by the lengthening period of time between the acceptance of an offer and the purchase being completed, due to a rising number of transactions breaking down elsewhere in the housing chain.

Estate agents

Confidence of estate agents continued to decline and more were either making staff redundant and/or closing offices.

There were a number of reports of estate agencies refusing to accept new instructions, particularly if the seller was unwilling to negotiate on price, and some had raised their fees to reflect the increased cost of finding buyers.

In the market for new housing, the number of starts continued to dwindle. With rising amounts of unsold stock on their books, some house builders were attracting buyers by paying he deposit themselves — having first obtained the agreement of the mortgage lender — or by offering shared equity schemes.

Prices of new houses were generally falling faster than in the market for established homes. In some towns and cities, prices of newly built apartments had fallen by over 25% in the past year, reflecting the degree of excess supply.

Difficulties

The government has acknowledged the difficulties being faced by those looking to buy a house for the first time. Under a new scheme first time buyers would rent a property at a discounted rate for two or three years, with an option to buy part of it.

The government hopes that this scheme - only available in England - alongside others will help 75,000 first-time buyer households on to the property ladder.

A first-time buyer couple on low incomes must save a year's worth of their take-home pay to buy their first home, the Royal Institution of Chartered Surveyors (Rics) said last week.

A couple in the bottom quarter of earners in the UK would need £27,738 to pay the upfront fees even before paying any of their mortgage, Rics said.

Rented property

While mortgage and credit problems have crashed the buying market the demand for rented properties remains strong.

The Association of Residential Lettings Agents (Arla) said that 39% more agents reported that demand had outstripped supply in the last three months.

Greater London and the South East have a particularly strong demand for rented property

The Arla research, based on responses from 444 letting agents, showed a fall in the average length of time that a property remained empty between tenants, dropping from 24 days to 22 during the last three months.

It also found that 77% of landlords said they were not planning to either buy or sell properties in the near future.

Some landlords are reporting much higher rents and increasing demand for rented accommodation.

While current landlords are doing well the bottom appears to have fallen out of the buy-to-let market. June reports show that there are a significantly smaller number of buy to let investment products available on the market. Again this can be attributed to the credit lines that fund this investment market drying up despite the apparent buoyancy of the rental market.