The report does confirm the trend experienced by Hart Brown’s residential property department over the last 2 or 3 months. The number of transactions has reduced with buyers becoming much more circumspect before offering on properties. The first 6 months of 2010 saw activity levels close to those of the heady days of 2007 but this was mainly due to a release of frustration from pent up buyers who had sat on their hands during the worst of the recession.
Once the fears of the public became reality in the form of massive public spending cuts following the election, buyers once again faded away at the same time as a number of sellers put their properties on the market. The political uncertainty at the time of the election saw some sellers holding fire in marketing until after the election which in hindsight can be seen as unwise. Since the election the balance has indeed swung in favour of buyers who, on a supply and demand basis, have more properties to choose from.
Some reports suggest that September’s lending figures show the lowest number of approved mortgages were the lowest for 10 years.
Due to uncertainty over jobs and the medium term concerns over the performance of the property market the % of transactions becoming abortive is higher than for some many months with many sellers who lose buyers selling at a good 5 or 10% less than the original offer.
The rental market is extremely buoyant which is a bad sign for the residential market as potential buyers are moving into temporary accommodation to gauge the market in the hope and now, expectation, of a further drop in prices.
As for the longer term view interest rates hold the key. The timing of any rise in rates will be absolutely key. Any rise ion the next 6 to 9 months would probably kill the market stone dead and cause some house owners huge problems. Coming out of fixed rates or tracker deals into above base rate products would see mortgage payments increase considerably and without pay rises result in many mortgages becoming unaffordable. Fire sales or repossessions would follow. We need to remember that rates came down in huge chunks, 1% and 0.5%, and are likely to go up at a similar rate, especially if inflation keeps running away.
A chill wind will blow over the already fragile residential property market this winter and possibly extend into the middle of 2011
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Read more about Hart Brown's conveyancing department
Article author: David Knapp
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