BSA launches new research report 'House Price Expectations'

The underlying strength of the housing market was the key message from a number of renowned commentators on the market at an event to launch the latest BSA research report House Price Expectations : An insight into how consumers think about property purchase.

The research quizzed 1,000 people who have either bought or considered buying a home in the last year. It found that 88% of buyers purchase their property because they want somewhere pleasant to live rather than they are looking for a capital gain, and that 71% of them recognise that property prices could fall in the future. If prices did fall, only 2% of them would seek to sell, while a 15% fall in prices would trigger 27% of investment buyers to seek to increase the numbers of properties in their portfolios.

As a consequence, it is unlikely that there will be a significant crash in the market. Were prices to fall, the majority of people would stay in their existing property, thus restricting supply, while any substantial fall would encourage people back into the market in the hope of picking up a bargain.

At the launch event, this theme was echoed by Ray Boulger of John Charcol. He noted that with interest rates forecast to decrease towards the end of the year, affordability will increase as the cost of borrowing falls. He also commented that the high levels of stamp duty and other costs associated with moving home is now acting as a deterrent to people moving, encouraging people to stay where they are and further reducing the supply of properties coming onto the market.

Kevin Shaw from estate agents Spicerhaart agreed. Forecasting a continued increase in property prices, he attributed this to continuing supply problems. He said that this wasn’t just due to the small numbers of homes being built, but that it was also a consequence of the high levels of stamp duty, while the new Home Information Pack requirements had seen a further reduction in numbers of properties coming onto the market.

Richard Donnell from Hometrack observed that although property prices are high, the majority of transactions are by people who are already homeowners and who have significant equity in their existing property. And despite affordability problems, 24% of buyers are doing so for the first time, showing that first time buyers are still coming onto the market. As a consequence, demand is remaining high, sustaining prices.

David Miles from Morgan Stanley agreed with further findings of the research that buyer’s expectations are heavily determined by recent developments in the housing market. Although recognising the supply and demand issues raised by other speakers, he said that there was a risk that with perceptions of recent events being so important to buyers, predictions of “soft landings” may not be accurate.

Questions from the floor were, not unsurprisingly, dominated by the credit crunch. Adrian Coles summed up the feeling of the panel when he noted that the very best borrowers with relatively low loan-to-value ratios will continue to get good mortgage rates.  Riskier borrowers wanting a higher advance will find it more difficult to get loans, with those loans still available being more expensive.

To see the full report follow the link below -