Posted by: Colin Wiles03/08/2011
One of my daughter’s friends has just bought a house, the first of her peer group to enter the property market. Is this a sign that the housing market is on the up?
This is definitely a QTWTAIN (Question To Which The Answer Is No), but there are some indications of a thaw in the mortgage freeze of the last four years. Almost 9,000 mortgage products were either brought to the market or updated between April and June of this year, according to data provided by Defaqto. This included 414 new mortgages, whilst 600 products were removed, but, significantly, 100 buy-to-let mortgages were introduced and only 66 removed. Compare this to the period between 2007 and April 2009 when the number of mortgage products plummeted from 15,600 to 1,542 as the financial crisis hit home.
Over the past four years banks have been frantically rebuilding their shattered balance sheets and it seems the tide has turned with new products coming forward and dividends being paid out.
As credit re-enters the housing market there is a danger that the lessons of the past will be ignored once again, and we end up returning to boom and bust. With housebuilding at its lowest level for sixty years any influx of mortgage credit will just lead to house price inflation, and we need that like the proverbial hole in the head. I am old enough to remember the crash before last in 1993, when Norman Lamont introduced the housing market package, funding housing associations to buy up whole new estates from developers as a way of stimulating the housing market.
Subsequently, between 1996 and 2007 house prices nearly trebled, whereas the underlying trends of building costs, inflation and population growth since were stable or rose only slightly. The housing bubble was the result of speculation and easy credit, funded by savers in China, India and other countries with a current account surplus. But the truth is that very few commentators saw the 2007 crash coming. Let’s hope this time around all of the key players show a little more foresight and common sense.
From Inside out
An independent look at the housing sector and beyond from Colin Wiles