Alun Thorne: Not a first time for everybody in house buying

Feb 11 2010 By Alun Thorne

Trying to predict the future of the housing market can be a pretty unedifying experience.

The multitude of data and the varying methods of interpretation is enough to make even the most brazen err on the side of caution.

Wading through the mass of surveys, there is unquestionably an upward trend in the market, but improvements are certainly not uniform across the country and for every optimist predicting the end of the worst, there is a pessimist equally certain that there is plenty more pain to come.

The trouble is that as values begin to rise again and more sellers come into the market, the underlying issue of finance still stands like a brick wall blocking any semblance of a true recovery.

Speaking to a partner at a well-known estate agents out in the shires put the issue squarely into perspective; not a single first time buyer has been through their doors since last November.

Now estate agents often see a lull in all activity over Christmas, but no first time buyers for nearly three months is a first in the history of this company that has been trading since the 1950s.

As detrimental as this phenomenon is to the housing market, it is not completely unexpected considering the circumstances.

In the two years or so since residential values collapsed and the credit market disappeared, it has become virtually impossible to get a mortgage on any kind of manageable terms.

The interest rate may be 0.5 per cent but good luck finding a sensible mortgage without being able to put down at least 25 per cent of the property’s value in cash.

According to this estate agent, the problem is not just with first time buyers either – the biggest issue for them is the lack of second time buyers. For all those aspiring homeowners saving furiously to eventually be able to cut the apron strings, there are as many homeowners again who bought in the past five years and now have no equity in their properties to help them make the next step up the ladder.

Only this week it was reported that the 90 per cent mortgage is making a comeback but at a minimum of a dozen times the current base rate, there are unlikely to be too many falling over themselves for it, regardless of how desperate they are to get on the bottom rung.

The lack of cheap credit for the banking industry and its subsequent reluctance to lend to both businesses and the man in the street lies at the heart of the recent downturn, and while the UK has nudged out of recession, the issues that took us into it are far from being resolved. Banks may be lending more to business than at any time in the past 18 months but SMEs are still finding it increasingly difficult to access affordable credit so the support through grants from organisations like Advantage West Midlands have been crucial in the current environment.

Unfortunately there is no such help for the mere house-buyer. The housebuilders themselves have introduced an endless stream of initiatives aimed at driving sales but these often revolve around shared ownership, reduced deposit or having to retrain as a nurse – what they can’t do is provide you with the actual cash to buy the house.

The complete lack of cheap mortgages for anybody with less than six figures in the bank is arguably the biggest issue standing in the way of the desperately-needed recovery of the UK economy.

Buying and selling houses generates wealth for consumers, retailers and governments alike. Equally importantly it satisfies the aspirations of an upwardly-mobile society which is being slowly crushed by watching those who got us into this mess carry on regardless. Banks and other mortgage providers continue to fall over themselves telling the world about the amount of ‘products’ that are now available to potential buyers, but they are still a million miles away from what the market and ultimately the economy really needs.

And of course there is the school of thought that house prices are still overvalued and the farther values move away from available credit, the closer we get to another substantial crash.

Whichever way you look at it, unless a solution is developed with some haste, the direction of the housing market may become rather easier to predict in the future.

n In a recent column I bemoaned the potential loss of the Yardbird bar when Paradise Circus is redeveloped following the expected demolition of the old Central Library.

But it would seem that all is not lost for the city’s jazz and blues fans as a new club has been launched.

G’s Bar and Diner in Ludgate Hill – the former Red Baboon – has launched its new Speakeasy Wednesday Club offering live music, a tapas buffet and special cocktails, although it would appear from its marketing material that while speaking may come easy, the written word may not be quite such a doddle.

Now every bar needs an edge and at the new club you can enjoy “a wide variety of drinks served discreetly and disconcertingly” but if you are more interested in the music then worry not as punters will be “delightfully entertained, with a laid back, but not worried about time of day; just slippin’ not slidin’, on a spoonful of Blues and succulent soft jazz provided by a band of disconcerted musos.”

Now there’s an offer!