A season for (house) lovers
It pays to shop around for the best home bargains.
Saturday 01 May 1999
This year, the enthusiasm for a new home will be at its zenith after six cuts in base rates. Competition for desirable properties in many of Britain's hot spots is already tough, and prices are soaring. Surveyors will tell you that they are snowed under with work, and in some areas homes are selling so quickly that estate agents are running out of suitable properties to show would- be purchasers.
Yet in other parts of the country sales are sluggish, and major lenders, such as the Halifax and Abbey National, are anxious to dampen down any talk of a boom. Martin Ellis, an economist with the Halifax, says: "There is undoubtedly a rebound in the market as confidence revives following the recent cuts in mortgage rates. Greater London is doing particularly well, up 10 per cent on the year. But other areas are not so buoyant, and we are still seeing price falls in the West Midlands. Activity is patchy and regional. Throughout the country as a whole, I find no real evidence of a boom."
The economists are right to be cautious about talking up a boom, but part of their downbeat message can be discounted by a fear that any evidence that the housing market is taking off will lead to higher interest rates. As one market observer points out: "The Government has stopped being concerned about the mortgage rate when considering its economic policy. However, a housing boom would put an end to that. The mortgage borrower would be right back in the hot seat of public policy."
The lending figures are also something a curate's egg, good in parts, without offering any firm conclusions. In February, for example, mortgage approvals reached their highest level since last June, but lending was still down on the 88,000 loans made the year before. One theory is that as the economy inexorably divides between the manufacturing and service sectors, between North and South, so that the housing market too is operating on two parallel planes, reacting to diverse local influences.
This would explain why the Nationwide last month reported that prices were 7.6 per cent higher than a year before, while the Halifax, with its more northern bias, puts the annual change at 4.4 per cent. Greater London prices have risen by 10 per cent, and those of the South-East are up 6.6 per cent, while those in the West Midlands are down 2.3 per cent on the year. Similarly, in the north, Yorkshire and Humberside values are creeping up at about only 2 per cent a year. As Abbey National's chief economist, Barry Naisbitt, says: "London is pretty immune to any problems in the manufacturing sector. But if you are a worker for a Midlands factory that you know is struggling, then buying a new home is probably the last thing on your mind."
London is also thought to be reaping the rewards of returning foreign investment which fled the capital at the height of the Far Eastern economic crisis. Prices were suppressed at the time in some areas when large numbers of forced sales came on to the market. Prices in a number of cities are also underpinned by the new chic of City living, which is leading young families to increasingly abandon the suburbs and countryside in favour of a pad in town.
Furthermore, waning returns from alternative investments - particularly pensions - have added impetus to the buy-to-let initiative which is also thought to be underpinning confidence. There can rarely be a time in living memory when the costs of buying a house to rent out have been so low and the returns so attractive, compared with the alternative homes that are available for your cash.
But all this euphoria may well turn full circle. In Edinburgh, which experienced a buy-to-let explosion to meet the demands of the new Scottish Parliament, there is now a surfeit of properties to let, with the result that rents are subdued. And where ordinary homebuyers are concerned, we are now at or near to the bottom of the interest rate cycle. If you see something you like this weekend, get in quick. The cheap deals available right now will not be there for ever, and houses may never be as affordable again.
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