Few in the market will have been overly surprised by the prediction last week that gross lending is on track to hit £137bn for 2010.
With gross lending for October hitting a 10-year low of £12.4bn – down 9% on the £13.6bn for the same month in 2009 – it’s clear to see the extent to which UK lending has contracted.
With predicted net lending of just £9bn for all of 2010 and some already forecasting that we could see negative net lending next year, the reality is that it will continue to be a difficult lending market in 2011.
And the bad news just continued to pile in last week. Data showed that the amount of property in England continued to be constrained with housing starts dropping by 1,500 in Q3 to 25,900.
With demand continuing to outstrip supply, hopefully this will at least constrain any further falls in house prices over the next year. But with borrowers unable to get on the housing ladder rental values are continuing to push upwards.
LSL Property Services’ latest buy-to-let index shows average rents rose in October by 0.4% to £691 per month. Annual rent inflation stands at 4.5% and LSL says that if rents continue on their current trajectory the average rent could be a wallet-busting £722 per month by this time next year.
Lack of funding and housing supply are having a devastating impact yet the government has remained mute. With purchases falling and rents booming, it’s clear the government needs to state what sort of housing market it wants in the future.
At the moment the only thing that you can interpret from its silence is that it’s perfectly happy with the current downward pressure on house prices and low lending.