Property investor

The UK market is coming back to life but the same can’t be said on this side of the Irish Sea

THERE ARE signs of new life in the UK housing market with a fifth month in a row price increase in September bringing values back to where they were a year ago.

Estate agents are reporting a much increased level of activity in many areas – but particularly in London – prompted by strengthening prices, mortgage rates of less than 2 per cent and fears that the choice could become more restricted in some key regions.

The recovery has surprised many because prices fell throughout 2008 and in the early part of this year as the recession swept down like an avalanche and disrupted banking and other financial markets. The recovery in prices and sales has come sooner than expected, given the continuing weakness of the British economy. Good and all as the news is, not everyone is convinced that values have finally bottomed out.

The cynics cite many of the same reasons that brought about the property crash in Ireland: ever rising unemployment, lower disposable income and difficulties in finding a mortgage.

In Ireland there was the additional consideration that a great many properties were overvalued. On the other side of the water there is the continuing concern that the British government will probably withdraw the stamp duty holiday.

Nevertheless, all the main measures of the housing market are now showing a return to growth. The latest study by Nationwide Building Society found that prices rose by 3.8 per cent in the third quarter compared with the second quarter – the fastest three-month increase since 2004.

Little wonder that the pick up in sales in recent months has been getting so much attention in the media because, like Ireland, the traditionally strong selling spring market simply did not happen this year.

Some of the doom and gloom has now been swept away with the pick up in transactions, particularly in central London. Other areas are also reaping the benefits.

According to agent Chesterton Humbert, its central London offices have sold three times as many properties in recent weeks compared with a year ago. Outer London is also doing well followed by the south-east and then the south-west.

Another study has shown that reduced house prices have meant that it is now cheaper for those looking to get on the property ladder to take out a mortgage than to rent. First-time buyers could save as much as £624 (€666) over the next year by switching their tenant status to one of home-owners, following the drop in prices from the peak of two years ago. The figures, based on the average mortgage costs of first-time buyers, apply to those purchasing a property anywhere in the country, except for London, where people still pay more to buy than to rent a home.

Like Ireland, UK lenders are continuing to cherry-pick the most low-risk borrowers by offering the best rates to those with deposits of 25 per cent. One building society has launched a one-year tracker rate of, wait for it, 1.98 per cent for customers with 40 per cent in cash and equity.

Irish lenders are unlikely to follow suit given that they have limited funds available and are already paying higher rates for capital borrowed on the international markets.

Any hope of mortgages becoming more readily available here in the coming months will largely depend on how quickly Nama proceeds to take responsibility for toxic loans and how successful the banks are in attracting new capital. In the meantime, the credit union is your only man. If you have a good record, they don’t ask any questions. The cheque is ready in a few minutes and for all they care you could be on the next flight to Las Vegas. Oh for the good life, just once more.