Property Values - Cautious Positivism

In the UK the credit crunch has yet again seen the great north south divide in the economy. Job losses are worse in the north of the country and so therefore is the possibility of the housing market picking up any time soon as owners face uncertain futures regarding employment security. Northern and Midland property prices will most probably recover later than properties in the south of England as manufacturing jobs losses further exacerbate the weak property markets in the north regions. For once Northern Ireland seems to have escaped the worst of the recession as so many of its employees are in the public sector; their pay has historically been on a par with its UK counterparts whereas the private sector [especially construction as a major employer] pay has always been considerably lower - usually about 11-13% lower. Here too the market is inert.

The Nationwide survey of May 29th reported that there had been an increase in property prices - 1.2% nationally and the Halifax in their latest monthly release of the Housing Price Index also report a modest increase in house prices 0.8%, confirming that the market has picked up slightly but warning that this may not yet be a trend.

Compared to the same time last year things are still grim but an improvement all the same. The problem with trying to boost the market is that the banks are still reluctant to lend money to builders for new builds and so it remains stagnant. With interest rates so low one would expect builders in particular to capitalise on the situation but the flow of cash and the timidity of buyers has put paid to projects that have had to suspend building or cease altogether in many cases, further exacerbating the problem of unemployment and the inability for many to secure a mortgage on a property. Since the difficulties in the US with Fannie Mae mortgages, lenders here have had to reassess their criteria for granting a mortgage to a potential buyer and it is no longer as easy as it used to be. Observers predict that as the year progresses however, mortgage financing should become easier to obtain while the banks recover confidence and lending rates should continue to drop as the effects of the credit crunch subside. Bearing that in mind though there is the possibility of bank interest rates rising perhaps as early as 2010 and rather than maintaining prolonged deflation the issue will be concerns over inflation.

Generally, those in the sector feel that the market has bottomed out now and that the only way is up. This will only happen after a period of flatness and the curve will be gentle. Money has to be available to make the market buoyant again and therein lies a difficulty. If oil prices and oil consumption continue to increase, investors' profits and therefore money in the system for lending will be adversely affected with the impact being felt by consumers and house buyers regardless of property values.