On the face of it, if certain commentators are to be believed, the turmoil in the property market is set to run well into 2013, with low interest rates, more quantitative easing and a fall in property prices of at least 20%.
But this is not a view that I subscribe to for several reasons.
For me, with the benefit of hindsight, 2011 will prove to have been the year that many of the best property bargains were bagged.
If we are to follow a general cycle of recovery in 2012 and beyond, it therefore follows that 2011 will prove to be the nadir for house prices and also interest rates. As the economy improves and confidence returns to the market, demand for property will grow once more. Given that there is a chronic undersupply of quality property, particularly in areas like London, house prices will begin to recover.
I still believe that house prices in the South East will still rise by around the 3% level next year as a whole, with any falls being concentrated in the first half of the year.
This will also coincide with an increase in interest rates as the Bank of England finally has to start controlling inflation, returning interest rates to more normal levels. The days of tracker rates at 2.5% and 5 year fixes below 4% will seem a long way away.
In fact, interest rate changes could be seen as early as the Spring, if people like Monetary Policy Committee member Andrew Sentance begin to win their argument that rate changes earlier rather than later are the best method of keeping a lid on inflation as the economy improves.
I would not at all be surprised to see a Bank Base Rate up at 1.5% – 2% by the end of the year if not sooner.
Certainly it is unlikely that we will see general mortgage rates in the latter half of 2011 being as competitive as they are now. For those looking to remortgage and finally enjoy the sanctuary of a fixed rate, I would be looking to do something within the next few months.
In other words if you do want to take advantage of low interest rates and competitive house prices, 2011 will seem to be as good a bet as any. In fact, it could prove to be the best time for many years to come.
The problem for many next year however, especially 1st Time Buyers, will be the ability to take advantage of such a situation given that mortgage lending will continue to be the preserve of those with large deposits, perfect credit and steady jobs. Those with just a 10% deposit, the self-employed and erratic income sources will find the going particularly tough, being constrained by tough lending criteria and, for those lucky to still qualify, priced out by higher than average interest rates.
In fact, if the Council of Mortgage Lenders are to be believed, mortgage lending could well dry up next year due to a combination of having to pay back government loans, tougher capital adequacy requirements and the Financial Services Authority’s latest set of proposed regulation.
While on the whole I expect gross lending to be similar to the figures for 2010 of around £135bn, actually maybe a slight rise to £140bn, and net lending to almost certainly drop further as many continue to pay their loans back, I believe that this is more of a veiled threat to the FSA and government with regards to further regulation than anything else.
There is talk of more lenders heading back into the market next year and brand new lenders following the likes of Metro Bank to bring in some much needed competition, which, whilst not changing the landscape dramatically, will assist in bringing in some more lending capacity.
It does seem to be the case that at times like these many commentators like to make out that things are worse than they actually are, so it is down to each individual to decide whether to wallow in despair, or to concentrate on only that which you can control and get on with making the best of things.
There is no doubt that a recovery will be upon us in the next couple of years. Whether this is sooner or later does not really matter, as we all know that the best deals are done just before the upturn is in full swing.