Thursday, December 6, 2007

Good News!

Good news! The Bank of England has today reduced the bank rate by 0.25%. This is a step which in itself will have little impact on mortgages etc but it does send a positive signal to hard pressed borrowers. If nothing else it indicates light at the end of the tunnel.

Many people have experienced £150 a month rises in the cost of their mortgage and this has come about because most mortgages these days are adjusted annually or are fixed rates or discounted rates. Add in to this scenario the recent hike in fuel costs – diesel locally at £1.09 per litre! and you can see why consumer demand has slowed.

In my opinion interest rates have always been something of a blunt instrument when it comes to slowing down the property market. In the late 1980’s and early 90’s interest rates rose to, albeit briefly, 15%. The property market was decimated and what needed a touch on the brakes began to appear as though someone had removed the wheels. It isn’t necessary to go to this extreme. They need to be a little more scientific about the process. It needs an ABS system for interest rates, to continue the motoring analogy!

We heard today of a bailiff in Hertfordshire attending two repossessions per day with the next week fully booked. Mr King and Mr Brown would do well to acknowledge that whilst controlling inflation is important those repossession levels are back to late 1980’s levels.

Wednesday, December 5, 2007

What's going to happen to House Prices?

When Will House Prices Finally Crash? – 24/11/2006 Money Week
Is there going to be a house price crash? – 2/11/2007 Thisismoney
UK house-price bubble about to burst – IMF 18 October 2007 Nick McDermott, Daily Mail

Every newspaper, pundit, lender, estate agent, developer, builder and householder would like to know the answer to ‘What’s Going to Happen to House prices’. If you read the newspapers last weekend from broadsheet to tabloid then your only conclusion could really be that they don’t know!

I think the Sunday Express probably came close when they said that the Government/Bank of England probably has 90 days to avert the same sort of crash that occurred in the late 1980’s to early ‘90’s. Of those 90 days 30 have already gone so the clock is ticking and the next 30 days are mainly holiday time over Christmas when not a lot happens in the property market anyway. A reduction in interest rates by the Bank of England may not actually have an impact on mortgages but it would send a signal to the homebuyer/seller that there is light at the end of the tunnel. Now is definitely the right time to speak to Margaret our resident mortgage adviser with Bright Mortgage Advice. She is an IFA (Independent Financial Adviser) and is able to search all of the mortgage market for the right ‘deal’ and is not restricted to any one insurer. With the ‘credit crunch’ upon us it could be the best initial move you make.

I don’t think there is any argument about the market cooling off. If you speak to any estate agent that you expect to tell you the truth (let’s face it they don’t all do that) then they will confess to market conditions being ‘challenging’. That is a real sign that the market is cooling, verging on positively freezing!

What then do we do about it? The answer is really very simple. The asking price of every property placed on the market needs to be accurately assessed initially and then closely monitored to ensure that the marketing feedback is strong enough to warrant holding it at that level. It’s fair to say that price reductions of less than 5% rarely do the trick as homebuyers don’t perceive a change in price.

At David Clark & Company we use a system for valuation produced by a company called Hometrack. They provide a service that delivers a property marketing report that gives us unparalleled market data to justify our proposed valuation. In Ely this is exclusive to our firm and we link this to a ‘market comparable’ report from Rightmove and leave it with you, in black & white – for free.

All agents should be members of some form of redress scheme and the majority (including ourselves) are members of the Ombudsman for Estate Agents. The code of practice that goes with that membership means that every marketing price opinion provided should be supported by details of the pricing of at least 3 comparable properties. We will do this whenever possible and have been members of the OEA since its creation and long before compulsion.

Above all don’t panic. Most of us here at David Clark & Company have been through difficult markets before and know how to look after your interests when selling and can provide guidance when buying. Talk to us when you feel the need to move.