Over the previous 2 or 3 years the housing markets have taken a big beating. The once solid investment hit the rails and left many people (and companies in big trouble). This situation has been well document over the period and is now under more scrutiny as the country tries to come out of recession.
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The term "safe as houses" has not been uttered since 2008 as many people try to sort out their personal finances and situations. House builders are still licking their wounds and whilst some have returned to profit many are not building at the rate they were pre 2008. This has left the country in a strange situation; there is a huge demand for housing for but no supply (or not at an affordable but quality level).
Normally in this case a rise in demand and a shortage of supply would push up prices, quickly. However as the housing market is somewhat skewed due to historic price rises there is a lack of low end affordable housing. What used to be a starter home is now a huge purchase, and with the lack of available mortgages above 75% loan to valuation it is very hard for first time buyers to get on the ladder.
Nationwide Building Society has produced some compelling information to the markets this morning. They reported that house prices rose by 0.5% in March which was above expectations; this leaves the current average house price at 164,750. Whilst this is good for people who are recovering from negative equity it is not great news for first time buyers.
The report has shown that over a rolling three month period prices have risen a significant 0.6%. However the Building Society has warned this is not the start of a new price boom. We think that really this is a good thing as the UK current needs stabilisation and predictability. It would be good to get back to a phase where you knew house prices were rising, but only at a small rate.
If this was a possibility people would start to feel more confident about spending. Instead of peak and trough news reports having predictable stable and in a way boring reports would be the best thing. In any period of uncertainty buyers hold off in case prices slide beyond the current point and sellers hold off in case prices or demand rises. In short nobody does anything and the market stagnates.
So we can expect a slow market for the remainder of the year, however if the labour market stabilises and new jobs are created in the private sector after the budget kicks in after April we could be set for a better 2012.