Wednesday, 9 July 2008

More thoughts on housing situation

I recently wrote about the marked slow down in house sales and I would say "you ain't seen nothing yet". It has to be realised just how much the UK economy is tied in to the property market and the government are very slowly beginning to acknowledge this. At PMQs today it was a subject raised by Vince Cable, one of the sanest MPs in the House, and it forced Harriet Harman, deputising for the absent Gordon Brown, on to the back foot somewhat. It was right for Cable to admonish the government for not taking this matter seriously enough. Now of course it is understandable that the government doesn't want to talk down our economy but I think things will get much worse before recovery takes place. I'm no financial genius but it seems so plain to me that one of the persistent fault lines in UK plc is this constant mismatch between the change in house prices and variations in the rest of the economy. Self evidently greedy mortgage lenders have so relaxed their criteria for would be home buyers over the last few years that they have assisted in the creation of an unsustainable boom. Now we have properties losing value, mortgages drying up, monthly repayments on the increase, estate agents closing or at least laying off staff and the major house builders drastically reducing the sizes of their workforces. It is very serious and will get markedly worse I'm afraid.

At this point I'll mention one of my current pet hates and that is the Home Information Packs or HIPS. Although not affecting me as I'm not thinking of moving it is nevertheless something I constantly rail about. I've never been at all convinced that they would ever really assist the house transaction process and now they will depress the market even more. If you are a vendor and you feel that your home isn't going to sell for what it was worth say six months ago you are not going to be overjoyed about shelling out hundreds of pounds on a HIP before selling. I think some estate agents were prepared to pay the HIPS cost themselves upfront and then recover this money when the commission was paid out (might be wrong on this mind) but with fewer sales and lower end prices and therfore smaller commissions they would be less keen now I would have thought.

With so many mortgage products being pulled and lenders getting more cagey it is securing the finance that will continue to be by far the major stumbling block in the buying process and that is a matter that the HIPS can't address. And as for having a survey included in your HIP my understanding is that the lender will still insist on their chap doing another survey before coming up with the money. At least this was the way of things when HIPS came in and I assume that nothing has changed so in effect both vendor and purchaser will be paying for a survey on the same property - weird.

I have to admit that part of the HIP is the environmental assessment that our masters in Brussels have dictated should be done (are all the other countries in the EU conforming I ask myself) But as to the rest of the info in the packs I think the government were trying to show they were doing something without thinking things through. Par for the course I suppose.

One final comment: in this village folk seem to be sitting tight, I can't remember so few 'For Sale' boards around. Countrywide it seems that people with property to let will be the gainers whilst buying hopefuls sit things out in the hope that house owning prospects will get better again.

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