Not so the prophets of doom. Banner headlines read ‘First-time buyers at record low’ and ‘House prices set to plummet’. Happy new year.
Although one of life’s eternal optimists, I suspect that this time there is more than a hint of truth in the pessimistic views on the housing market. Property prices have enjoyed an incredibly buoyant period and the market cycle suggests a correction is overdue.
This correction may have come sooner had it not been for lenders’ largesse that has seen them sanctioning the use of income multiples inflated to match demand.
I suspect that many of the recipients of this generosity will be less enamoured with their lot when they see interest rates pushing upwards and property prices falling back to meet them. It will be interesting to see the extent to which lenders – that have fuelled the upward movement of property prices with their misplaced generosity – will continue to raise the bar to flog their wares.
I don’t fall into the ‘We’re all doomed’ camp. Whatever correction we see this year will as always be a temporary check. But when it does arrive it may be longer lasting than we’ve seen for a while. High prices are hitting first-time buyers, without whom the market stagnates.
And the problem with vendors is that having sampled the heady brew of excessive paper profits they are reluctant to accept lower actual sums when it comes to selling. Adjusting prices to reflect the reality of the market is a slow and laborious task.
What else makes the pessimistic property pundits likely to be more accurate with their portents this time? Well, Home Information Packs for a start. This is the year of their predicted arrival and whatever their long-term impact, the short-term effect will be undoubtedly constrain the market. We will lose the spontaneity of the prospective sellers who take a punt to see what their property’s worth. This year it becomes an expensive option which will deter many.
So with record levels of personal debt, rising interest rates and the threat of negative equity lurking in the wings I fear the stage is set for many home owners to see a reversal of their fortunes, particularly in the South-East where the merry wives of Windsor may find their past borrowing decisions are a comedy of errors leading to a rather bleak house.
And on that contrived note I wish you all a healthy and prosperous new year – hope it won’t be an annus horribilis.