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Faint signs of buyer interest

An increasing number of individuals feel the time is right to consider buying property but they are realistic about the problems they will face, says Neil Johnson, mortgage policy manager at the Building Societies Association

The fourth Building Societies Association Property Tracker survey offers a glimmer of hope for the property market but despite this it is clear we are a long way from recovery.

The survey seeks to find out how app-roximately 2,000 people view the property market by asking three questions – is now a good time to buy, what are the main barriers to buying and what will happen to property prices in the next 12 months?

Most surveys looking at the property market canvas industry participants for their views. But with sentiment playing such an important role in the house buying process the Property Tracker’s significance is that it asks ordinary people how they regard the housing market.

The latest survey was undertaken at the beginning of March. It opens by asking if respondents agree that this is a good time to buy property (see chart).

The answers offer hope for sellers, with a total of 54% of respondents tending to agree that this is a good time to buy. By comparison, when the first survey was undertaken in June last year only 27% of people felt that way.

This change in mood is likely to be a result of improving affordability due to a combination of house price falls and cuts in the Bank of England base rate making mortgages cheaper.

But this good news is tempered when we consider the answers to further questions. The survey explores perceived barriers to property purchase by asking respondents what they consider to be the most significant impediments to buying property.

Back in June the biggest barrier, chosen by 70% of respondents, was the affordability of monthly mortgage repayments. However, no doubt reflecting the fall in base rate from 5% to 0.5% over the same period, by March this had fallen to just 31%. Instead, in March the single biggest barrier to property purchase – identified as such by 61% of respondents – was lack of job security. This was a small in-crease compared with the December survey when 58% of respondents identified it and a huge increase from June when lack of job security was cited as a big barrier by only 12% of respondents.

The second biggest barrier is getting access to a mortgage or a mortgage that is large enough, with problems raising deposits being the third biggest barrier to buying homes.

Interestingly, concern about a future fall in the price of property is now less commonly regarded as a barrier than in previous surveys.

Just under a third (31%) of respondents think future falls in prices will prevent property purchase compared with more than half (51%) in September. This may be because a greater proportion of respondents now expect price falls to be less severe than was the case previously.

This hypothesis is upheld by the answers to the third question in the survey – what will happen to property prices in the next 12 months? The March survey predicts a fall of 6.1% for the 12 months to March 2010 compared with a forecast 8.6% fall in December and 8.4% fall in September.

Clearly, a number of consumers are starting to take the view that although property prices have fallen – by more than 17% in the past year according to Nationwide – and will continue to fall, they don’t have much further to slide. As a consequence of this, it is clear that individuals are starting to recognise that the time may be right to consider buying property.

But the flip side to this trend is that although consumers are starting to think about buying they are also increasingly realistic about the problems they face in doing so.

Concerns about job prospects along with a recognition of the tightening nature of the mortgage market and consequently how difficult it is to secure funding loom large in the minds of prospective buyers.

So although the survey shows that an increasing number of individuals are interested in buying property it is clear that the deteriorating economic situation and problems getting mortgages are could prevent their wishes from being realised.

Until economic confidence improves and the supply of mortgage funding is increased it’s hard to see potential buyers being willing or able to buy homes.

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