UK Property Market – Will it Recover Before 2012?
In a recent report, The National Institute of Economic and Social Research stated that the recent stabilization we have been experiencing in the UK property market was being propped up by an undersupply of homes, and that this alone would not be enough to sustain a long term recovery. Frankly, I have to agree with the sentiment. As I have previously written, there are a number of short term reasons for any undersupply of properties on the market, sentiment of seller not wanting to part with their assets that were valued much higher eighteen months ago, seller choosing to rent in the short term, developers mothballing large developments and not bringing new stock onto the market. I believe the supply (and a lot of it), is still there, it’s just waiting to come onto the market, and when it does it will once again outweigh demand.
The NIESR report stated that the number of mortgages available was still 65% lower than before the credit crunch and that it was that lack of credit that would snuff out any nascent recovery. Mys sentiment exactly; prices recover slightly, people list their properties, no-one buys due to lack of credit, prices fall again and properties leave the market again!
Simon Kirby, an economist at NIESR, said: ‘There has been talk of stabilization and some recovery in the housing market, but we don’t think this is the case. We only see growth in the housing market returning in 2012.’
If you look at who’s espousing recovery, it tend to be those industry professionals with a vested interest in the subject, i.e. their businesses rely upon people listing property. For example, property portal Rightmove reported recently that asking prices were up for a fifth month in 2009 and that buyers had missed the cheapest properties. I think not, but that is personal and professional opinion and I may be proved incorrect.
The Bank of England also said this week that mortgage lending may strengthen in coming months. It may well do, but will mortgage lending more than double? I doubt it, but it needs to, to bring the numbers back to previous levels.
And a report from the Royal Institute of Chartered Surveyors last week showed a dramatic turnaround this year, with just 18.1% more surveyors reporting falling property prices in June, compared to 76.2% in January. Great, anyone heard of the term “dead cat bounce?”