According to recent figures published by the RICS, more and more Estate Agents are being forced financially into closing their doors to the general public due to house sales of less than 1 per week – a 30 year record low. Are things about to change?
“Interesting, tough and challenging times” are amongst the more optimistic phrases being used by brave Estate Agents and industry professionals to describe the current UK housing market. However, despite the obvious downturn in property sales, according to the “Supply & Demand” theory which underpins our economic history, surely if we read between the lines, a much needed trigger point for a shift in direction is nearly upon us?
The Government has an ambitious housing target of building two million new homes by 2016. This equates to building in excess of 200,000 new homes each year in order to reach their target. According to the RICS UK Construction Market Survey published in October 2008, to date, only 66,220 new homes have been built in 2008, with a fall below 25,000 per quarter likely by the end of the year. National Developers are finding it increasingly more
difficult to finance these large scale development plans which will in turn leave the target of new build homes to fall well below 100,000 this year.
difficult to finance these large scale development plans which will in turn leave the target of new build homes to fall well below 100,000 this year.
As the economic climate continues to weaken, houses prices across the UK continue to fall and are selling at an average of 9 percent below the asking price with sellers in some regions being forced to accept as much as 12.5 percent discount off their advertised price.
How far do house prices have to be cut to trigger investment and first time buyers to enter the market again?
Simon Rubinsohn, RICS chief economist has recently said that “predatory buyers have been hovering over the corpse of a stalling market.” According to the third quarter ARLA Review and Index, Buy-to-Let investors have recorded an average rate of return of 10.92% over five years on residential rental property bought outright. For a geared investment with a Loan to Value ratio of 75%, the average return is 21.07%.
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