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Reasons to be cheerful in the new year

I always smile when I hear industry pundits writing off 2009. I believe the recovery will start next year as house prices are bottoming out and the return of supply and demand will reinvigorate the market.

If we look at Halifax’s house price index, average prices dropped 8.4% over the first four months of 2008 and a further 8.1% over the next three. But they only dropped 2.8% over the next three months and that’s progress.

This process will be accelerated by base rate cuts as property will soon produce better returns than bank or building society savings accounts.

Life expectancy is rising thanks to advancements in medicine. On average women in the UK live for 82 years and eight months and men outside the mortgage industry can expect to last 79 years and six months.

As Britons live longer this will further constrict the UK’s already tight housing supply.

Net immigration has now hit 237,000 people a year. The number of workers registering in the UK from New Europe including Poland and Latvia declined year-on-year but this was countered by a sharp rise in asylum seeker numbers.

The UK population is estimated at just under 61 million and could reach 70 million by 2028, further stimulating demand.

And divorce is a factor too. Increased stress and uncertainty have caused many marriages to break up in the past 12 months. The divorce rate will spiral for a few years as we inch our way out of recession and this will have an impact on the property market. Demand will grow as a result of single households becoming two.

On the day that Bradford & Bingley chief executive Richard Pym announced that buy-to-let as we know it is dead, Mortgage Strategy Online ran an article about frustrated home owners resorting to renting out their properties rather than selling them.

This has led to a slight drop in rents as supply outstripped demand but this is only temporary.

I don’t disagree that buy-to-let as we knew it is dead but we are still processing a healthy number of applications plus second home, holiday home and pied a terre loans.

Lenders happily process them as residential deals so that they can use less stringent Financial Services Authority lending guidelines, so the statistics for official buy-to-let are low. But consumers still have faith in property as an investment and lenders are happy to lend.

Finally, I was delighted to see Northern Rock launch an exclusive 65% LTV deal. This is a big step forward and will eventually lead to 70% LTV deals. Who knows, 85% LTV products may eventually make a comeback.

I will be flying out of bed at the beginning of January as I see many reasons to be cheerful. If the doom mongers take their eye off the ball, some of us will clean up in 2009.


Making sense of uncertainty

The recent Lending Strategy lunch with Sunday Times economics editor David Smith generated a fascinating debate about the future of the market and provided food for thought for the group of industry leaders.

RBSIP launches free online call back service

Royal Bank of Scotland Intermediary Partners has set up a free online call back service where brokers can book time slots to speak to the lender and resolve their case enquiries.


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