Housing market reports leave us all confused

Oct 2 2008 By Nevill Boyd Maunsell

What on earth is going on in the housing market?

On the face of it, not a lot. That is the trouble. Nobody is rushing to buy a place today that they think will get a whole lot cheaper if they wait. And the banks are in no mood to encourage them.

Now that they are approving only 32,000 mortgages a month, at the latest count, one wonders how mortgage lenders can gather enough evidence to compile their detailed indices for house prices with any sort of accuracy.

One wonders, too, whether they are catching the “gazundering” whereby, we are told, those buyers that do venture into the market are routinely chipping tens of thousands off the agreed price at the last minute.

One wonders because the actual numbers published by Nationwide are nothing like as dreadful as the mood music that goes with them, let alone the City’s fears of something nasty in the woodwork at Halifax, the biggest mortgage lender.

In Herefordshire you might not have noticed that house prices have fallen at all over the past year. Nationwide puts the loss at a precise one per cent. Even a nine per cent drop across the West Midlands, or ten per cent across the UK (or 12 per cent depending on the sums) is less than a calamity in the context of prices that had more than doubled over the previous decade. By any sensible reckoning they had become unaffordable and due for a fall – without the benefit of any credit crunch. Remember, this time last year house prices had risen by almost ten per cent over the previous 12 months.

In other words, we are more or less back where we were in October, 2006.

Either these index numbers are woefully understating the reality, or the misery is being overdone as much as the previous euphoria.

One theory is that something really terrible is happening with new urban flats built for buy-to-let landlords, who have just stopped buying. Just look at Bradford & Bingley, brought down by dodgy buy-to-let mortgages, they say.

Well, the mortgages that brought down Brad & Bing were those it had unwisely bought from, of all things, an offshoot of General Motors.

Upwards of five per cent of these were more than three months in arrears in August, compared with only 1.8 per cent of those sold by B&B itself.

The Council of Mortgage Lenders says that just 1.1 per cent of the 1.1 million buy-to-let mortgages outstanding in the first half of this year were more than three months behind – slightly less than for the mortgage market as a whole.

Things may have got worse since June, but surely not worse enough to seize the entire housing market solid.

Buy-to-let landlords may indeed be reluctant to buy new flats they fear they cannot let economically.

But it hardly looks as if their existing portfolios are the root of the trouble.

The banks are the more likely culprits. Unnerved by the credit crunch, they have set deterrent terms for their mortgages, certainly for anybody who cannot put down a 25 per cent deposit.

It is these mortgages that people don’t want, not the houses.