New-build sector may slow recovery.
Posted on September 1st 2009
The BBA figures out last week showing that mortgage approvals were at a 17 month high was welcome news. Housing transactions appear to be finding their way through despite the continued difficulties in securing mortgage finance; many of my friends in the estate agency business are also supporting this view as they have seen average sales per month rise from around 10 per agency to about 17 today. But let’s not get ahead of ourselves, as they say one swallow does not make a summer.
It will take several months of positive data to convince investors to return to the UK mortgage market and to convince lenders that it is safe to lend money again. Estate agents are holding an all time low level of stock so there is little choice for would be buyers, this is potentially holding up prices in the short term.
More important in my view is the evidence that house builders have started to build houses again, after the last 18 months of inactivity in this sector this should be seen as very positive. However, house builders and developers are going to have to clean up their industry so that lenders have the confidence to start lending on new builds again. There are going to be many more stories coming out of the woodwork where lenders have been badly burned on new build properties. Let’s hope this is not another roadblock on the road to recovery.
