It’s a shame it isn’t tomorrow, then when you read the article below you would be left uncertain as to whether it was an April Fool’s Day joke.
But it is no joke. The last few days have seen the strongest evidence to date that the great property crash of 2008/09 may be drawing to an end.
That is not to say house prices won’t continue to fall. But the latest set of data from several different sources does seem to imply the end is in sight.
As ever with the property market, the Royal Institution of Chartered Surveyors led the way. For some time, it has been reporting on a rise in the number of enquiries from prospective buyers. More recently, it was actually able to show a slight improvement in its index which compares quarterly sales with the number of properties on its books. In fact, the RICS index for tracking the ratio of completed sales to the stock of unsold property has now risen for two months in a row, although it is worth remembering, however, that the index is still near its all-time low.
Then along came the British Bankers’ Association and the Council of Mortgage Lenders with evidence to suggest mortgage approvals were rising. Then a week ago, Assetz produced research suggesting that annualized house price changes were showing signs of improvement. It analysed data from the leading surveys, looked at moving average scores and concluded “our best estimate of when prices will stop falling is currently September 2009.”
But during the last few days, the pile of evidence has grown.
According to Hometrack, house prices fell by 0.6 per cent in March. That isn’t good, but at least it’s the lowest rate of fall recorded by the company in 10 months. Hometrack said: “Two key lead indicators from the survey posted clear changes in direction this month. The average time on the market fell to 11.3 weeks from 12 weeks in February. The number of sales agreed also increased (by 19 per cent ) as did the number of new buyer registrations (8.5 per cent).”
Then yesterday, the Bank of England revealed its latest lending data. Mortgage approvals rose by 19 per cent between January and February. In all, 37,937 mortgages were approved. Even arch property bears Capital Economics rang a note of optimism, with one of its economists, Vicky Redwood saying the figures “suggest that housing market activity may finally have turned a corner.”
It seems even buy-to-let investors are making a comeback. According to the Association of Residential Letting Agents (ARLA), the number of estate agents who said landlords were buying properties in the previous three months more than doubled. It also said “a lower number said that landlords were selling properties.” But don’t expect the same hype you would have seen a few years ago. ARLA added: “These figures do not represent a move back to the imprudent days of landlords being indebted to an irresponsible level and struggling to pay their many mortgages. Rather it shows that the buy-to-let market is going back to basics, to what it was originally meant to look like and achieve when it was set up some years ago.”
And finally, the evidence is completed with the latest consumer confidence index from GfK NOP, which rose by five points to the highest level recorded since May last year.
Even hints of an end to the crash have come from abroad too. Recent data has shown prices in the US have risen modestly, while this morning Bloomberg reported on data suggesting property prices in Hong Kong rose by 5.5 per cent in the first quarter.
You need to understand, no one is saying it’s over. House prices are going to continue to fall for a while yet, but the latest data suggests there is light at the end of the tunnel.
But, on the other hand, there are reasons to be sceptical.
The rate of interest is now so low, that those who can obtain finance at levels approaching official bank rate will find that mortgages are incredibly cheap. With all that quantitative easing, mortgage availability will surely improve further.
But, unemployment is set to rocket. Government finances are becoming too stretched. It seems inconceivable that repossession levels won’t start to rise quite significantly, and this could change the balance of the demand–supply mix in the market. The more properties that are repossessed, the more prices will fall.
But the real caveat should be this one. Just because interest rates are low now, it doesn’t mean they will be low in a few years’ time. People who are tempted to jump back into the property melee now, could be in danger of repeating the sub prime errors seen in the USA. It is not inconceivable that mortgage rates could double over the next few years, and those who are seduced by today’s low rates must be sure they can afford their mortgage even if the cost rises significantly. It seems unlikely people are taking this into account.
© Investment & Business News 2013