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More needed to restart housing market, says report

07 November 2008
Written by rosalind renshaw




Housing market prospects for next year look grim unless there is major intervention, warns a new report. Published shortly before yesterday’s announcement, it says that a large interest rate cut will not be enough on its own.

It says the scale of the housing market downturn is likely to accelerate in 2009, and that the UK market is in a worse state than that of the US, where it is concentrated into problem areas. Here, the mortgage freeze affects the entire UK market, whilst the knock-on effects into the economy will bump up repossessions, further adding to the market woe.

The research was commissioned by the National Association of Property Professionals, for the National Association of Estate Agents, which until now has done its best not to send out negative messages about the market. 

The second part of “The Modern UK Housing Market: Origins and Prospects” by Michael Ball, Professor of Urban and Property Economics, Department of Real Estate and Planning, University of Reading, cannot, however, be ignored.

The report points out that the crisis affecting the housing market is without precedent and there is no knowing how far the market will fall unless something is done about it quickly. It says that this autumn’s interventions to help the market have not been enough and the effects have already evaporated.

It argues that the scale of the reduction in mortgage credit is so great that few can buy but that more sellers will be forced into the market. They will increasingly need to cut prices, but many will not find buyers because too few in the market to buy will be able to get mortgage finance.

The report argues that the whole of the housing market needs kick-starting, and that if this happens, the crisis could end.  It calls for:

Substantial cuts in interest rates.
Strong new measures to increase the volume of mortgage lending substantially.
Temporary government guarantees for mortgages, both for first-time buyers and others.
Further, more extensive, temporary action on Stamp Duty.               

Peter Bolton King, chief executive of NFOPP, who is currently in America for the National Association of Realtors Conference where no doubt the US housing market is top of the agenda, said: “Investment landlords, the overall shortage of housing supply and the numbers now believed to be renting but waiting to buy, all suggest that recovery would be fast if it were allowed to happen. However, prospects for the housing market look grim. The Government and the Bank of England need to take the situation extremely seriously.”

The report also underlines the value of the housing market to the whole economy, estimating it is worth 60% of overall asset wealth. It also argues that home ownership may have grown as much as it can, and that modern private renting will become an increasingly important part of the UK housing market.

www.naea.co.uk/modernukhousing/

Comments

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    The Banks greed, and the Governments need are so great that nothing short of a miracle will bring the property market back to that just 18 months ago. Public spending, or waste its the same thing is so out of control that nothing can sort out the mess the country finds itself in. Public borrowing to maintain the public waste is only going to make the current difficult situation catastophic in the years to come. Cut public spending, get rid of all the sponging managers in public office, raid the public pension pot like the private ones and we will start to see improvements, until then, its not looking good.

    • 10 November 2008 09:17 AM
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    No manner of intervention will kick start the property market. Confidence will need to return before the market is active once again.

    • 08 November 2008 01:22 AM
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    I agree with Vossy. Suspending stamp duty will provide more capital to buyers in raising deposits, which in turn would see an increase in the movement. However, with the government having turned the UK into a penniless island, and with all other taxes on the verge of increase to meet the demands of a nation that is already struggling to survive, can the government actually afford to suspend stamp duty? probably not. And, the way the banks have been acting lately, chances are as soon as stamp duty was suspended and more money was available for deposits, the banks would start asking for higher deposits!

    • 07 November 2008 03:46 AM
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    Playing around with Stamp Duty or HIPs isn't going to help. Both these costs tend to be put to the end of the transaction and are covered, surprise, surprise, out of the mortgage! This crisis started with lenders hiking up rates and tightening lending criteria in response to unwinding funding markets. There then followed a collapse in consumer confidence as we all watched the banking sector begin meltdown. Any recovery needs to start with banks addressing rates and lending criteria so that funds are available as consumer confidence begins to return. On that basis the reports conclusions seem to be no brainers!

    • 07 November 2008 12:59 PM
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    Another option is to suspend Stamp Duyt thereby allowing buyers to increase the deposit they have thereby making any property purchase less of a risk for the lender.

    • 07 November 2008 12:23 PM
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    Perhaps more cash buyers and sellers could be encouraged into the market by killing off the HIPs which I am sure is a deterrant for opportunist movers

    • 07 November 2008 12:07 PM
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    Sounds like good advice but I find it hard to believe the government will take a blind bit of notice, why break the habits of a lifetime?

    • 07 November 2008 11:19 AM
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