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More than a million people are registered with estate agents wanting to move. Rightmove.co.uk had 22.6 million page views on 10th August - a record. The Council of Mortgage Lenders said that the number of mortgages approved for house purchase soared 23% in June compared with May.
I calculate that there are around 700,000 homes on the market at the moment, down from the more usual million plus that the market usually offers. Asking prices are coming down, sale prices are on their way back up so why is it so difficult for people to find a new home?
There are two potential villains. On the face of it you’d have thought that both ought to be cheering the glowing embers of the residential market. Each has whinged over the past two years and neither has been shy in going cap in hand to the Government (tax payer) for help.
Banks are the bad guys
Despite pretending that they are in business to lend money, banks have cut the number of mortgage products from over 10,000 in August two years ago to less than a thousand today. You need a squeaky clean credit history and a whopping 25% deposit to put down before the bank that pretends to say yes says ‘maybe’.
Then it will drag it’s feet taking twice as long to process half as many mortgage applications and it’s valuers will then come back saying that the price agreed is 10% more than the actual value of the property in question. Clearly they have never heard of a property being worth what someone will pay for it!
The CML and John Charcol calculates that around 30% of all mortgage holders are either close to or already in negative equity. They may not want to move but those that do won’t have the record deposits that the banks seek before they will lend. With average house prices over £150,000 this means that buyers have to find around £40k out of taxed income!
I have always tried to explain that house prices are not dictated by supply and demand - rather the availability (or otherwise) of credit. No matter how many estate agents you register with or number of times you look at web sites, unless you can borrow the money, you can’t move.
Rightly, those who needed to ‘self-certify’ their income and others who couldn’t really afford a loan are now being kept out of the market but unless banks think that house prices are going to fall further then the 75% loan to value has to be relaxed.
House builders are bandits
The other bandits are house builders. Despite having thousands of acres in their ‘land banks’, having written down the value of those banks they refuse to build anything like the volumes required to satisfy demand.
Of course propping up prices by squeezing supply is an old trick but we should be under no allusion here. The biggest variable in the price of a new home is the cost of the land.
This land has more than halved over the past eighteen months and yet the price of a new home has fallen by less than 15% across the country. Persimmon reported average prices of homes reserved since 1st July is £174k compared to £163 in the same period in 2008.
If like so many you can’t buy a home, you don’t have to look too far to find those in whose gift it is to get turnover going again. Don’'t think that this will necessarily result in higher prices, but it should mean that rather than owning a home being a right, it is once again a privilege.
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