It seems that not a week goes by without yet another headline on housing hitting the front pages of our country’s newspapers. Last month we saw the Prime Minister David Cameron, deputy prime minister Nick Clegg and the governor of the Bank of England, Mark Carney, all wade into the increasingly heated debate on our country’s housing market.
The argument they’re having? Are we in a house price bubble and should government support schemes designed to boost people’s ability to buy property be scaled back sooner rather than later?
The other debate is when the Bank base rate of interest should be raised from its all-time low of 0.5% – something that will see the cost of many people’s mortgages start to rise.
My own view is that it would be dangerous to pull back on Help to Buy or raise interest rates too quickly. Strongly rising house prices are only recently a feature across the UK and fears of a house price bubble only have a proper foundation in London. The debate is raging because we are in the run up to a general election and housing is a key battleground for parties. It’s easy pickings to comment on an “overheating property market” and blame one another for the shortage of new builds causing it.
But these arguments are pretty meaningless for most people in the UK. Unless you live in London, where I will admit there are some serious imbalances in the value and availability of residential properties, we are only just beginning to get back to a healthier housing market. The latest Land Registry data for Bath and north east Somerset revealed that on average house prices rose 1.8% in March on the month before. Annually house prices rose by 4.8% bringing the average house price in the area to £242,406. In the City of Bristol meanwhile, house prices in March rose 1.1% over the month to £182,158 – an 8.1% jump from the same time last year.
These are healthy numbers and we should be pleased that we are seeing sustained inflation in house prices in the west country. Lest we forget, it was only a few years ago that Britain was in the depths of recession.
Nowhere has that been more apparent than in the property market where the lack of appetite by high street banks for lending to property developers is still in the process of recovering. It is my view that the promising figures for property values, while welcome, really reflect a much lower volume of property sales and transactions. In other words, we are not quite out of the woods yet. The knock-on effect of pulling government support schemes like Help to Buy would be felt much further afield in the property market.
At Bath & West we provide refurbishment loans and finance for property developers who want to invest in unmortgageable properties – that don’t have a bathroom or kitchen for example – do them up and sell them on. We also offer buy-to-let finance and second charge mortgages to help homeowners or property professionals free up cash to invest in improving homes.
This is possible in the current market because there is a healthier level of mortgage finance available to those who will be buying from these developers. Without the government schemes, there is a risk that in areas of the country that have really only seen a fledgling recovery so far – like the north west of England – growth and confidence could be so severely dented as to reverse that recovery.
At Bath & West we sit at the grass roots of the property economy and my sense, honed over 30 years dealing with financing property in the UK housing market, is that confidence is back, but we must nurture it not suffocate it. As it stands, there are opportunities for those in and around where we operate in Bath, Bristol and surrounding areas to make money investing in and developing property.
But we must not forget it is a delicate balance of supply and demand that makes this possible. Finance is available from specialists such as Bath & West who understand the local market. Buyers want to buy and are able because there is confidence and mortgage finance is available relatively cheaply.
It would be a mistake to upset this balance too early on. It’s easy to dampen demand for housing, and much harder to get it going again.
