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Market Outlook - May 2009

Thursday, 7th May 2009

Categories: Market Analysis Property Prices Sales

Author: Peter Barry

In the month that has passed since I last wrote about the outlook for the housing market signs of increased activity have continued. Viewings are still on the increase and the previous reluctance of potential purchasers to make offers has subsided.

It never fails to surprise me how quickly things can change in the housing market – it’s almost as if a group of potential purchasers arrange a secret meeting and agree that it’s time to start buying property again. Of course the same phenomenon can work in reverse as well – confidence is a very fragile thing.

The statistics over the last month are still showing price falls across the wider market although we seem to be bucking the trend here in London where the re-emergence of buyers has provided some support to prices; for the time being at least.

With the prices of most properties having fallen by 20% or more from the peak affordability is not the problem it once was - the key house price to earnings ratio fell to 4.26 in April - its lowest level since the autumn of 2002, and well down on its July 2007 peak of 5.84. Even in the wider market the pace of the price falls is easing; indicating that we may be approaching the bottom of the market.

Interest rates are the lowest they have ever been and likely to remain at the current level for several months.   

The one piece of the jigsaw that is still missing is the wider availability of mortgage finance. Lenders are still demanding record deposits across the board and routinely refusing applications from buyers with even slight blemishes on their credit record. This will have to change before a more sustainable recovery is possible.

It’s still too early to say whether these encouraging signs are the much talked about ‘ green shoots’ or just a blip caused by brave buyers looking to time the bottom of the market. We’re just pleased to see a bit of activity again.