Housing Market Still Looking Good
There has been much speculation in the media recently about the short term future of the housing market. Many observers have been predicting huge reductions in valuations of properties over the next twelve months and several comparisons have been made with the crash in the housing Market of the early nineties. This in itself has fuelled concerns for many people who are considering either moving home or buying for the first time and confidence is generally low for anyone about to take out any type of home loan.
However, when we consider the reasons for previous property crashes and the economic circumstances at the time, it seems likely that the present housing market will not see the same level of reduction as previously.
The latest statistics from the Halifax shows that, generally, house prices fell by 2.5% in March and that they were overall 1% lower for the first quarter of this year compared with the final quarter of last year. Although these figures show a decrease in property values across the market, there have been large variations from region to region, with some areas actually showing an increase in values, whilst, others such as Wales and the West Midlands have seen above average reductions (although these areas had previously enjoyed above average growth).
Although loan and mortgage companies are suffering at the present time, there are many positive factors to support the property market. Employment levels for individuals is at a record high, inflation is at a low level which in turn keeps interest rates low. Many of us remember the early nineties when inflation was running at 10% and interest rates reached up to 15%. Currently the Bank of England base interest rate is set at 5% and is likely to reduce further over the course of the year. Also there is still a significant shortage of housing and Government targets for new homes are likely to fall short of requirements. People will always need somewhere to live and the demand for homes remains high.
Overall, the latest predictions suggest a slight reduction in house prices of less than 10% over the next twelve months, but with people generally having lower loans on their properties against the value of their homes, the equity ratio looks strong, which should stop the potential problem of negative equity as we saw in the early nineties. On average, house prices have risen by 171% over the last decade and what we are currently experiencing is hopefully nothing more than a price correction rather than a crash.
