Stagnant UK Property Market: Buyers Perspective

It has been widely reported that the current market conditions are such with very low volume of transactions, falls in mortgage approvals, and an overall stagnation in the UK property market.

Stagnant

Nationwide reported that house prices rose 0.3% in April but are still down 1.2% on last year.

The number of houses sold in May was up 4.7% on the previous month’s figures and reached the highest level seen since May last year.
House sales were 2.0% fewer than May 2010 but significantly up 14.7% on May 2009 and 18.6% up on May 2008. The recovery was led mainly by activity recorded in the North of England and the Midlands. This is very encouraging.
There was positive news for the number of new ‘For Sale’ instructions received in May. In the UK they were up 1.7% eradicating the -0.5% drop seen in April.

It is important to analyse the factors causing this and the mind set of Buyers, and there finally seems some light at the end of the tunnel.

Just today the UK Base rate was held again at 0.5% for yet another month, all indications suggest that there will be no drastic upwards movement. Therefore many home owners and investors are content with staying with existing properties where they are enjoying very low interest rates often just a fraction over the base rate, if they were to sell off current properties and find new ones, it is almost impossible that they will be able to gain similar rates. They conclude it is better to stay put and use the extra savings to pay off capital rather than buy or sell into new properties.
However with such a low base rate saving rates are also very low, which with current inflation figures mean that real return is actually negative.

PropVestors are better placed to either put extra cash into paying off capital or reinvesting in property rather than having money thats losing money in ISAs or savings accounts.

Investors are seeing much better returns on rentals rather than the negative real return of having money in a savings account.

In other property news today it has been stated that rents in particular in Central London are expected to rise 8-10% in the year to come. Investors are well placed to get great returns. Current renters should also think about becoming FTBs (First Time Buyers)  to avoid high rent increases and instead use the low base rate to get on the property ladder. With these factors there should be upwards pressure on demand and property prices, so what is holding back the market?

The UK mortgage market is still very inactive, even though data is showing a recent increase, from our personal experience and that of our clients the lending criteria is very strict and stringent and only those that fall into a model profile, income base, age, and credit history are the ones where mortgages are being approved. Further to this the LTV (Loan to Value) is still surprisingly low in comparison to boom times.

PropVestment concludes that from a buyers perspective the primary factor why buyers are not as active as they would like to be is simply that the lending is just not available and with prices especially in the South East remaining so high. Even those lucky enough to secure finance, they just can not make the deposits needed to buy when the LTV offered is as low as it is.

LENDERS START LENDINGNext Week : Sellers Perspective
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