Mortgages  

Rics data supports fears of housing bubble

The number of new properties coming onto the market fell in April for the fourth consecutive month, but 26 per cent more chartered surveyors reported an increase in agreed sales in the latest Royal Institute of Chartered Surveyors (Rics) residential market survey.

The figures from Rics have further fuelled the argument as to whether the country is in the midst of a housing bubble.

This supply and demand imbalance is backed further by Rics data showing a dearth of new instructions. Nine of the 12 regions that the organisation monitors have observed a decline in new sellers coming to the market during April, while new buyer enquiries are positive in all regions.

Fears of a bubble are only partially mitigated by data from Halifax that showed house prices dropped by 0.2 per cent in April compared with March. The same data showed an 8.5 per cent rise year-on-year, and prices are 2.3 per cent higher in the three months to the end of April than the three months to the end of January.

Simon Rubinsohn, Rics’ chief economist, said there were “tentative” signs the price momentum would slow in the second half of 2014 for London.

In a survey of buy-to-let investors carried out by Wriglesworth Consultancy in conjunction with Mortgages for Business, 60 per cent of respondents said they were planning to increase their property portfolios over the next six months.

Data from the Council of Mortgage Lenders showed the total number of new loans for homeowner house purchase increased by 4 per cent – to 50,000 –in March ahead of the Mortgage Market Review (MMR) compared with February’s figures. The first quarter of 2014 saw 27 per cent more sales compared with the same period in 2013.

Lenders are offering increasingly attractive terms. Leeds Building Society announced the first 10-year fixed-rate Help to Buy mortgage on the market. It has launched two 10-year products, one fixed rate Help to Buy mortgage at 4.99 per cent, and a 10-year fixed-rate Help to Buy version of its Welcome mortgage at 5.16 or 5.34 per cent.

These deals are only available in conjunction with developers Barratt Homes, but Newcastle Building Society quickly followed suit with a rate of 4.49 per cent available to all and fixed until 30 June 2024.

Ross Glanfield, financial planner at Lift Financial, says it is not just Help to Buy or buy-to-let that is encouraging a housing crisis, especially in London. “Since the property bubble of 1992, every doom-monger has been trying to call the next London property crash while ignoring the fact the London market has major supply and demand issues.

“At the top-end of the market, overseas investors want a second home in the capital which is releasing equity for those wishing to downsize or pass funds onto their offspring to buy properties further down the ladder,” he said.