Stuart Law, the chief executive of the investment firm Assetz says that a property shortage and increased rents will keep the housing market afloat for the foreseeable future.
He, amongst others, are quoted in an Express report that is rather bullish about the housing market.
Commenting that the house price falls now appear to be bottoming out his view is that house prices will rise by 5% in 2011, “The acute housing shortage and rental squeeze remain the key medium-term drivers in the property market’s recovery, underpinning prices for the foreseeable future. As positive forces continue to outweigh the negatives we forecast house price growth of five per cent for 2011” he said.
He is also of the view that future Bank of England extensions to the Special Liquidity Scheme will free up money for mortgages (which it hasn’t so far) and that interest rates will go up possibly in two stages to 1% by the end of the year. “But a rise in interest rates will happen only when the Bank is certain of the economic recovery being well underway” he went on.
Although not as bullish Robert Gardner, the Nationwide chief economist, said that ” … we believe large house price falls of the magnitude seen in 2008 are unlikely, given that interest rates look set to remain fairly low and limit the level of mortgage arrears and distressed sales”.
But Peter Rollings of Marsh & Parsons estate agents say they expect a ‘surge‘ in high end property sales prior to the new stamp duty rate of 5% on house sales of over Â£1 million due to come into force in April this year. So I have to ask will this mean the end of the Â£1 million plus market after April.
They obviously wrote this before the latest, albeit early estimate, of the state of the economy released today showing a contraction in Q4 2010. They also sound like they do not believe that fuel duty hikes in Jan just gone and April to come will affect peoples’ confidence and buying ability. As well as the imminent National Insurance Contributions rise. Then there’s the increasing underlying price of commodities like fuel and food.
Then comes the real biggy, public sector cuts! These have yet to really impact on the population and when they do there will be much wailing and gnashing of teeth. That will lead to distressed sales as BTL landlords see their tenants go into arrears and people start getting redundancy notices and have no insurance (income or ASU) in place to cover their mortgage and no real prospect of quickly finding a job.
Housing market price statistics built solely on historically minute numbers of transactions are a joke, as the only people who can afford them are the few people with cash and high paying jobs.
Yes there will be ups and downs in the whole market but the trend over the years will be down until the average wages versus prices is re-established. And no amount of dreaming from the planet Zog will change that.
If you are in the market for a house make sure that you realise that you may have to own it for many years if you want it to even maintain value in real terms. Treat it as it should be treated – as your home to live in and look after.