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The liquidity question

24th December 2008 | back to article listings BACK    print this article PRINT

In its preview of the 2009 housing market published today, the Royal Institution of Chartered Surveyors (Rics) was not exactly full of Christmas cheer. It tipped a year of falling house prices, continued restrictions in mortgage availability and an inadequate number of housing starts, with less than 80,000 new homes set to begin construction and a risk of volatility as a result.

However, even Rics did not play scrooge altogether. It noted that with prices down this year and expected to drop another ten per cent in 2009, a buyers' market is emerging. Already, said senior economist Simon Rubinsohn, signs are emerging of a reversal in the number of transactions.

He stated: "Transaction levels do seem to have hit a floor with some signs that opportunistic investors are returning to the market. We expect a modest rise in sales over the course of the next year from the very low levels seen in recent months."

A ten per cent increase in these will occur over the year, Mr Rubinsohn predicted, despite the limitations on mortgage finance. Here, however, he suggested the situation "should" be eased somewhat by the implementation of the Crosby Report recommendations, although these represent "no panacea" for the market.

Nonetheless, for those looking to buy property in 2009 - be they investors or residential buyers - the possible improvement in mortgage availability will be a key factor. Commenting on this during the week, estate agency Chesterton commented that this will be a major factor in the market recovery.

Indeed, chief executive officer for the firm Robert Bartlett offered a similar analysis of the market to Rics, commenting: "With the worst of the decline behind us, potential buyers are now out in far greater numbers than in previous months, believing we are very close to the bottom of the market. The number of viewings scheduled this month equals that of a year ago and the number of offers is actually above last year's level."

Mr Bartlett suggested that to extend the availability of credit to turn this small recovery into a big one, the government could use its power over Northern Rock or the Royal Bank of Scotland to make more mortgages available.

But if this does not happen and the recovery remains mild, this will bring some good news for investors. Mr Bartlett forecasted that the buy-to-let market will probably stay "buoyant" due to low buyer numbers in 2009, as many would-be first-time buyers stay on the sidelines. So for those who are landlords, the slow pace of recovery in 2009 could have considerable benefits. This will ensure that for some at least, it will be a happy New Year.

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