Despite the snow, landlords could be forgiven that yesterdays dual announcement that interest rates down at 1% and house prices rising in January by 1.9% according to the Halifax could herald the first green shoots of a housing revival.
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Not according to a recent article in Moneyweek by the Associate Editor David Stevenson.
He has no doubt that the rise in prices recorded by Halifax was a pause before an inexorable continuation of the downward trend. The reasons?
1. Affordability whist improving is still above long run trend house price to average earning in December despite falling from a record high of 5.84 was still at 4.5, above the long term average of 4.
2. Prices don't drop in a straight line - during the last big property downswing almost 20 years ago, prices fell for seven months in 1989, then rose in three of the first ten months of 1990. That didn’t stop a subsequent two-year 15% price slide.
3. The low levels of transactions in the market make the latest figures far from reliable. For example these figures from the Halifax ignore cash purchases at auction where prices are likely to have shown far steeper falls.
4. Unemployment currently at 6.1% could double in the coming years to just under 4 million.
With all these grey clouds on the horizon, it may be too soon to call the bottom of the market.
As they say, 'one swallow doesn't make a summer!'
I dont want to talk the housing market up too much but the point about affordability that the Halifax make should really consider the effects of interest rates and how that affects it.
ReplyDeleteI like to look at the CML's stats cml.org.uk - and go to Stats which does look at this.
Regards
David Lawrenson
www.lettingfocus.com/blog.html