Despite the continuous bad news headlines churned out by the lenders and the media, it’s heartening to hear that the average person can now see a light at the end of the property tunnel.

With the prime interest rate sitting at an all time low of 0.5% it’s easy to forget that in April 2008 the prime interest rate was sitting at a whopping 5% having been reduced from the previous July’s 5.75%!

There has been a lot of talk about the UK recession in 2009 and while British consumers anticipate the unexpected in property, it seems we are set to continue to enjoy the impact of the current low interest rate for some time to come along with other positive 2010 predictions.

Reasons for optimism

- House prices have risen in 2009 despite the double dip warnings and we look set to enjoy a more moderate pace of house price increase in 2010

- The interest rate will remain at 0.5% which is way down on the 5.5% we had in May 2007.  This should last at least nine more months allowing us all a bit of extra cash and clearing the way for more money printing and continued low rates

- The buy to let market is seeing strong signs of improvement

- A weak pound has made British products cheaper, helping exporters

- The UK economy has shrunk less than we actually thought

- Loan lending is down due to lack of supply not demand!

- Offset mortgages are now being offered

- HomeBuy Direct has received an £80m extension. This is the government shared equity mortgage scheme where up to 10 000 first time buyers are helped to buy specified newly built homes.  This scheme has already received interest from over 32,000 people since September

- Green housing measures are increasing dramatically which can only improve our living standards

- A powerful stock market rally has boosted confidence.

- Natural disasters are at their lowest in a decade globally

- Unemployment rises have been smaller than originally forecast.

- The upcoming election will keep all parties on their toes and the power with the people – so vote!

- The effects of Quantitative Easing take nine months to work. QE began in March so we should start to enjoy its benefits around the New Year onwards.

- The ‘libor’ rate (a measure of bank trust) has fallen back to BELOW pre-crunch levels.

- France and Germany are just out of recession along with South Africa, Japan and the US

Obviously one of the biggest factors for 2010 is the upcoming election and all indicators are that the Conservatives will sweep the board with an overwhelming majority.  Considering their election promises of abolishing stamp duty and raising the threshold on inheritance tax, freezing council tax for two years and providing tax cuts for new jobs to get people back to work, it could be a better 2010 under their guidance for home owners and first time buyers.

Take a look at what a few of our serious property colleagues had to say about the forthcoming year in our Property Pathways 2010 Predictions column.

In conclusion, 2010 should see us well on our way to recovery!

GET READY FOR THE LATEST NEW HOMES FROM REDROW

Searchwells Crystal Ball Predictions for 2010!

“Business has definitely picked up since the summer and I’ve been busy moving people into new homes and lifestyles.  My enquiry book for 2010 is also healthy – although I must admit that anything is better than 2008 and the first part of 2009!

Whether the property market will pick up for a sustained period of time is hard to call as the market has changed outside of the usual seasonal norms several times this year and I predict this will continue in 2010.  The General Election (whenever it happens) and its result will effect whether potential purchasers feel confident enough to think of buying and new home and maybe selling their current home.

I predict two very different marketplaces.  First time buyers and those of us purchasing property around £500,000 in value will need to ensure they have a secure mortgage offer and also a fair purchasing price agreed before they proceed with their transaction.  If not, when the property is surveyed/valued by the mortgage provider, you could still be at risk of a down valuation and your purchase may fall through if a compromise cannot be met.  If you are buying a new home, make sure the builder offers you the best deal possible and you’ll be fine.  And, if you are selling a property make sure you have a secure offer on your property (or even be on the way to exchange) before you start looking for a new home.  My advice to you is to therefore get organised and make your offer for your next property the most attractive it can be.

On purchases over £500k and particularly on purchases above a million, I predict there will still be a shortage of good quality properties available to view and purchase.  Prices will therefore continue to rise in this sector and purchasers will need to ensure they are able to proceed to exchange as quickly as possible in order to be able to secure and acquire their next property.  Again, make sure you are well organised and focused on what it is you want – then when you find it, you’ll be in the best possible position to be able to negotiate and then proceed to exchange.

Property is still a good investment – but now it is more of a long term investment than it has been since 2007.  Remember that 99% of us aren’t property developers – so go after the best property for you and remember, buy the best location, the best build and the house that suits your needs the most.  Then I’ll predict – you’ll love your new home! “

Leonora Wollner  – Director and Co-founder of Searchwells Property Finders www.searchwells.com 01245 344 844

For the Buy to Let Market

“2010 will be the year of opportunity. The number of buy-to-let mortgages available has increased[1] and will continue to do so. “A number of providers are beginning to enter the buy-to-let space, and, as a result, existing landlords are adding to their portfolio. New landlords are also entering the market and this is the ideal time – before inflation kicks in.  Unemployment levels will dip further early in the New Year, and the affordability gap for first time buyers will increase, which will result in an increasing demand for property rentals. House prices will continue to increase, but this will not be reflected by peoples’ salaries. And, a shortage of housing will drive up prices in 2010, particular in tenant hot spots, such as London and other major UK cities.”

James Davis, founder and CEO, UPad.http://www.upad.co.uk

[1] In September 2009, there were 179 buy to let mortgage products available, compared to 3662 in August 2007. There are currently 239 buy to let mortgages available.

Kim Peters, Redrow’s group sales and marketing director says: “When it comes to predicting where the housing market will go in 2010, one thing is certain – nothing is certain! Even the experts can’t agree.

“However, even in the most challenging conditions there are always people who want or need to move and we will be doing everything we can to make sure our new homes are at the top of every purchaser’s wish-list.

“This will include the introduction of a new collection of traditional family homes, with fewer apartments and townhouses in our collection; while work started earlier this year to enhance our interiors and add value to our homes will also evolve further.

“Redrow will continue to assist home buyers as much as possible through initiatives such as part-exchange, Mastermove, HomeBuy Direct where relevant or help with deposits and other moving costs. This ability to help facilitate a move gives new homes a major advantage over the second hand sector in a more challenging market.”

Redrow has a variety of developments across England, Scotland and Wales. For more information call 0845 676 0500 or go to www.redrow.co.uk .

Mortgages and lending in 2010

We are not expecting dramatic changes in lending going into 2010 but what we will see, will be quite significant.  Rates are predicted to remain low at the start of next year but they will increase at some point and we are strongly recommending any clients committing to new mortgages to assess affordability at a higher rate to take into account future increases to both the base rate, which will, in turn affect the tracker deals. Fixed rates will be re priced ahead of rate rises too so it is advisable to consider carefully what your future payment could be. There is some concern for those clients who are on standard variable rate, unable to change to a different rate due to lower levels of equity/negative equity, or just a change in their circumstances. These clients will also need to prepare for future rate rises which could in turn lead to higher arrears levels/repossessions and therefore more pressure on lenders.

Some lenders have already begun increasing their standard variable rate even though the base rate hasn’t moved – the main reason being that this is a way to increase income. We can see more building society mergers which unfortunately does reduce competition and therefore does affect borrowers in the long run.

The self certification mortgage market is a non starter at the present time and we do not see this changing.  Many borrowers are going to be restricted when they come to move or reassess their mortgage if a rate change is due and it is essential that these clients speak to a broker for advice. They will need to plan ahead if they are looking to move and be more realistic with their accounting as proof of income will be needed.  Each lender has their own requirements for what they will accept as proof of income so it is worth taking advice in advance of when you may need to remortgage or move.

On a positive note, we do know there are new lenders waiting in the wings – we feel this will help get more unusual lending propositions moving again and some lenders who have not been lending during the last 12 months will be re launching. It is expected that lenders will become more competitive going into Spring so hopefully this will give a much needed boost to the housing market and we can look to a brighter 2010.

Salli Anstey – private wealth mortgages

Gtr London -1.2%

South East -4.3%

South West -1.3%

W Midlands +0.6%

E Anglia +0.5%

Wales -1.9%

E Midlands -1.2%

North West -4.3%

Yorkshire -0.5%

North -5.8%

Overall  HPI being -1.2% change in the month on December 09 and an overall 1.7% change in the past year from December 08.

Halifax cite the average house price for December ‘09 at £167 664 whereas RightMove say it is now at £221 463 – down from their stated November figure of £226 440.  Most lenders agree that this is due to Seasonal slowdown.

*Halifax base their figures on mortgage approvals of loans.  RightMove base theirs on asking prices of properties as they enter the market.

The biggest expense we all have each month is our rent or our mortgage and there’s very little we can do to reduce that.  We can however save money on other items such as insurance premiums.

Insurance is a pre-requisite for everyone whether or not you own your property and it soon adds up and for some, seems like an unnecessary expense.  What makes things worse is that with the recession the insurance companies have experienced a large proportion of insurance fraud and in response have hiked up the premiums for the basics such as buildings and contents insurance.

Here are a few tips on how to keep these premiums to a minimum:
1) Check your buildings insurance covers external damage too.  Some insurance companies will send an assessor to the property to determine the type of external elements that could affect subsidence etc.  If you have a listed property it’s best to request that they do so you’re not facing any insurance exclusions.
2) Shop around for the best deals as some insurers are offering free contents cover with buildings cover which is a great saving.
3) Ask your insurer for discounts if you add products to your policy eg:  pet insurance, car insurance, travel insurance.  It’s often cheaper.
4) Consider how much you’re prepared to pay in excess as it can affect your premium dramatically.
5) Check your credit rating.  Insurers are in the risk business and if you are a bad risk your premium may rise.
6) Don’t swop insurers too often.  The longer you are with them the better history you’ll have to bargain with in the future when you add products to the insurance.
7) Stay away from flood areas!   Check where you are buying as flood risk insurance is very expensive.
8) Ask your insurer which regions they consider more secure and what you can do to reduce your premiums by way of added security.  In the meantime:
a) Fit window locks on all windows to reduce your premium.
b) An alarm system will also reduce your premium.
c) Secure your garden and drive way with fencing, gates
d) Add more secure locks to doors where necessary including garage and shed
e) Join a neighbourhood watch programme

None of us wants to over spend on insurance but neither do we want to be under insured.  Keep an eye on the small print and ask your insurance company how you can reduce your premiums but still maintain the insurance you need.  Most are happy to send an assessor to your property to determine what actions will best help you.

In Sky News recently we heard that mortgage lending for house buyers was 19% higher during July this year than in the same month in 2008 indicating the first material annual growth since early 2007.  The number of first time buyers applying for loans also increased significantly, some 18%, giving hope that the battered property market is genuinely on the road to recovery.

Whilst some pundits extol the virtues of the low base rate others are anticipating a down turn in late 2009 and early 2010.  What comes across loud and clear to Property Pathways is that whilst the property market in the UK is still a real mixed bag at the moment with no one able to predict what will happen next, the forecast is a far rosier picture than the 8% fall for 2009 and flat line for 2010 as predicted in Reuters June survey.

The latest polls indicate that house prices have finally bottomed out and a slow return to growth is anticipated after the second quarter of 2010.  The Banks are rebuilding trust even with all the toxic debt they have, appearing more stable and even though we all know they are not out of the woods yet, monthly mortgage approvals have increased even with the tightened lending criteria.  Recent surveys also indicate that there are around a million first time buyers just waiting for increased confidence to encourage their entry into the market.

Bovis Homes confirmed a growing trend of stabilisation in August with Bellway and Taylor Wimpey posting positive trading statements in spite of the forecast decline for completions in 2009.  Prospects for house builders are optimistic in the long term with a current under supply of housing, low interest rates and higher employment being likely to increase demand in the second half of 2010.

The global crisis of 2008 to 2009 has created a massive shortfall of new build stock in the UK market making the period up to 2016 the perfect time for buying ‘off plan’ as more and more developers are going to be stepping back into the market to fill the ever rising demand in order to secure loans to start building.  This in turn means that they will be willing to incentivise ‘off plan’ sales as quickly as possible by making them as attractive to the buyer as they can.  In turn, all property sold against good solid fundamentals will increase in value as the market begins to move again with the mass entry of the first time buyers.

If you are considering buying, ‘off plan’ could be the way for you to dramatically increase your profit as long as you remember that the earlier you get in, the better the deal will be and the less risk you’ll take as long as you focus on the fundamentals like shops, schools, transport links, employment opportunities and investment.  With ‘off plan’ you will be buying property at rock bottom prices with an upward trend in the property market that is on your side right now.

In the meantime home owners need to be aware of the predicted ‘double dip’ that could hit in early 2010 should the record low interest rates of 0.5% currently being enjoyed be increased.  If this happens, the borrowers who’ve survived this far because of the low loan rates will be pushed even further increasing repossessions and forced sales which will add more supply onto the market and could push house prices down if not tempered by the entry of the first time buyers.

The good news is that for those in the market to buy it’s a breathing space to make the right choice knowing that you can offer between 20 – 25% lower than the current asking market price and probably secure a great deal on your mortgage to boot.  The latest HSBC’s 1.99% home loan offer has created a lot of speculation and it’s yet to be seen whether or not the other lenders follow suite.  What is certain is that the Bank of England will be forced to keep the interest rate relatively low throughout the first quarter of 2010 to balance low inflation and expected tax rises.

Looking at the biggest price improvements among property types you’d be well placed to look at terraced houses as they are registering rises of 3.2% against last July followed closely by semi-detached and flats.

“Be greedy when everyone is fearful, be fearful when everyone is greedy.”

Warren Buffett – U.S. investor, businessman, and philanthropist.

There’s also been a strong surge in the buy to let market in 2009 as home owners are unable to sell their properties for the expected return and investors are snapping up bargains to rent out until the current recession breaks.    The Association of Residential Letting Agents (ARLA) revealed data of the types of properties being snapped up on the buy to let market as:

Semi detached 68%
Detached 67%
Terraced houses 52%
Flats 29%

If you are in the enviable position of having cash flow to buy then do it now before the cycle swings and take a long hard look at off plan buys.  (We will be taking a more in depth look at this topic in November)

Some lenders are even offering let to buy schemes where by you are allowed to borrow money to buy a new home to live in whilst your existing house is let out to tenants.  You can borrow without your existing mortgage being factored in as long your rent on that house covers the monthly payments!  In this way you increase your property ownership but, if you’re downsizing, you reduce your monthly costs.

Those of you sitting tight can shop around for fixed mortgage deals now ensuring that you enjoy the benefits of today’s low base rate for a few more years to come.  When your current mortgage deal expires don’t just transfer to the lenders standard variable rate, shop around and see what’s on offer first.  A fixed rate mortgage offers peace of mind for a set number of years.

With the lull before the boom still ahead for the next nine months rather think about adding value to your home and if you do remortgage factor in those extras such as a conservatory or another bedroom whilst the interest rates are in your favour.

Ultimately adding value will pay off when it comes to selling.  Nationwide Building Society and RICS tell us that a loft conversion adds the most value to a home these days at 21% added whilst a new kitchen or conservatory will only add at best 4 – 6%!

“Experts are not expecting mortgage rates to increase during the remainder of 2009 but as to what will happen next year, the picture is not quite so clear.  If you have some slack in your monthly budget to absorb any rate rises next year, HSBC’s is an attractive offer”

Andrew Hagger – Moneynet.co.uk

The headline rate may be attractive but the deal is reserved for those with 40% equity in their homes and has an arrangement fee of ₤1199.  The rate goes up the less equity you have.  However there are a myriad of attractive offers out there at present as the squeeze continues and any savvy homeowner should take advantage of them.

In the meantime, we’d recommend doing your due diligence on the property market whilst battening down the hatches for a little bit longer, looking at adding value to your property before putting it on the market and considering taking advantage of the situation with ‘off plan’ buys and buys to let.  However, if you’re a first time buyer or have investment cash – buy, buy, buy!