The May Statistical Release from the British Bankers Association is being reported as a “Steady rise in mortgage lending” but upon closer inspection this is not quite all the figures say.

The BBA release does indeed confirm an increase of £2.3bn in the TOTAL amount of mortgage money lent over the figure 12 months ago (now £597.8bn) but goes on to say that gross mortgage lending for May is DOWN 50.7%

The British Bankers Association report is a woeful attempt to cover up the shockingly poor lending figures for May. By concentrating on the total amount of money they have lent (£597.8bn) which has not surprisingly increased over the past year they have conveniently tried to hide the fact that total mortgage lending in May was down a staggering 50.7% to just £7.7bn. While banks lent a further £2.3bn, home owners have seen the value of their properties fall by 25% (according to The Halifax) since the peak of the market two years ago.

“Net lending is now running at a level which is nearly half the long term average before 2008 and confirms my concerns that we are a long way from seeing house prices stabilise. These figures prove that banks are still not lending in anything like enough volume despite the billions pumped into them by tax payers. With so few buyers able to raise the required deposit averaging 25% it’s not surprising that house prices continue to fall despite a dearth of new properties coming onto the market.

The problems of the housing market have been blamed on everything from Home Information Packs to MP’s expenses but the simple fact is that until buyers can borrow sufficient money on affordable terms then house prices, already down a quarter since the peak will continue to fall – perhaps by as much as 25%.

Norman Lamont is the last person to be remembered for talking about ‘Green Shoots’ and it now looks like those who dusted down his old quote over Easter this year were making a similar error.

At the time, “Housing Minister Margaret Beckett claimed there are signs of an “upturn” in the property market despite figures showing prices are still plummeting. The housing minister even warned there could be another house price bubble in the ‘mad rush’ after mortgage lending resumes.
“And property is starting to sell, according to Peter Rollings, managing director of Marsh and Parsons Estate Agents in London. He said he can see demand slowly returning to the market.

In April “The firm said prices in most areas of London had fallen by 25-30% and were back to the levels seen in 2004. Marsh & Parsons revealed it enjoyed double of the agreed sales so far in 2009 compared to corresponding period in 2008.

Tosh!!

I’ve just completed my analysis of the latest Land Registry data and the sales in April (which won’t be formally announced until the end of July) suggest that the green shoots may in fact have been the gardeners nemesis, Japanese Knotweed!

Here are the numbers;-

April 2007 95,254
April 2008 62,370
April 2009 14,572 (so far)

(Conveyancing solicitors may be busy playing golf and therefore not make their returns in the same month so the Land Registry allow three months before formally publishing the totals but they do make those that have been made available. The totals for March and April are therefore provisional but historically these early numbers don’t double).

“There is no doubt that the number of sales taking place has been on the up in recent months as asking prices have increasingly been realigned with the realities of the market,” Tom McClelland of the RICS said on 15th April.

The most recent Land Registry report confirms the dire state for sales in London in February down 59% and sales across England & Wales for the February were 50% lower.

So, talk of green shoots seems to have been wishful thinking at best. Even if the total number of sales in England & Wales for April finally ends up at over 25,000 this will mean a 60% fall in the number of houses that were sold over the traditionally busy Easter period – when according to the Halifax, house prices had already fallen by quarter since the peak of the market nearly two years ago.

In February, I received an email out of the blue from a couple in Harrogate who at the time were renting a property having sold their home in June 2007. The peak of the market.

I gave them some cautious advice and four months later they have bought a new house – at a whopping discount.

From: “PV”
Date: 3 February 2009 07:55:22 GMT
To: henry.pryor@mac.com
Subject: Advice please!!!

Hi,

Quick line to gauge your views on our predicament. We are in rental and have been for some 18 months having sold our house in Harrogate June 2007. Have an opportunity to offer on property in York that was initially £325,000 fourteen months ago now on at £249,950 and intend to offer £225,000. The property does need some updating but nothing too major.

Quite a reduction if we can secure at the lower price…………. or do we hold on for another three, six months or even longer?

Many thanks,

P & D V

and my reply;-

From: Henry Pryor <henry.pryor@mac.com>
Date: 3 February 2009 08:52:29 GMT
To: PV
Subject: Re: Advice please!!!

Morning P,

Question. Was the property in York ever worth £325k? 

If it may have been then the maths adds up and this is the kind of reduction I would expect. The only real test is can you afford £225 if it is accepted and if the cost of any borrowing were to increase (remember rates are unusually low today) then can you still afford it? 

I don’t expect the market to bottom for a few months yet but then if I knew I’d be worth a fortune, wouldn’t I. If you are buying a home then remember that if you pay a little more than you have to, it’s where you are going to live. As my wife reminds me, what’s money for if not for paying for a home for your family?

I hope this helps and good luck.

Kind regards,

Hclp.

A brief acknowledgment;-

From: PV
Date: 3 February 2009 09:17:21 GMT
To: Henry Pryor <henry.pryor@mac.com>
Subject: Re: Advice please!!!

Henry,

Thanks for the advice, much appreciated. We are cash buyers so the lending issue is negated, hopefully the offer will be accepted!

P & D

Then finally;-

From: PV
Date: 7 June 2009 08:43:47 BST
To: Henry Pryor <henry.pryor@mac.com>
Subject: Thanks!!!

Henry,

Quick line to once again say thanks for the advice you offered on a recent house purchase near York. The original deal fell through so we found another house and have exchanged contracts etc etc.

As an indicator as to how the market is around York we offered 20% below asking which was accepted and then found two years previous (at the height of the market) it was valued around 20% higher than present day. In real terms a drop from peak of around 35-40%.

Despite the hype the market here appears ripe for cash bargain hunters, however many properties remain on the market for many months.

A recent conversation with an estate agent revealed that a number of chains are now collapsing at the bottom due to first time buyers finding difficulty funding. Detached around 300-400k are proving difficult to sell.

I hope this assists for your research and once again thanks for the advice,

PV

The housing market is divided into those like estate agents, mortgage brokers and house sellers for whom the glass is half full and others, like house buyers, who who think they’d like a top up!

The latest RiCS survey once again tries to put a gloss on a corpse – wanting to encourage potential sellers to come out of their bunkers and presumably help their members earn a commission.

Interest in property is up again” is the BBC Online headline announcing the latest monthly survey from the Royal Institution of Chartered Surveyors. New buyer inquires have increased, fewer sellers putting their properties onto the market has helped underpin prices they say and one RiCS member hopes that “the usual summer seasonal downturn does not now occur”. Perhaps he hopes that buyers won’t be going on holiday in July and August.

In the detailed press release RiCS confirm that in their survey of just 248 surveyors, new buyer enquiries increased faster in May, available stock was down more than a third on 12 months ago and they reported the fifth consecutive rise in something called the ‘sales to stock’ ratio suggesting that “the pricing environment is improving”.

However, look closer and the numbers aren’t that cheery. The seasonally adjusted ‘net balance’ of surveyors reporting falling rather than rising house prices has narrowed but in their helpful notes that explain what they actually mean. What they confirm is that actually 44% MORE surveyors saw prices fall than those who saw them rise. Those who saw no change are not included.

At the peak of the housing boom in July 2007, the balance of RiCS surveyors who reported a rise minus those who saw a fall was plus 12.6%. The average number of homes on their books was 63.4 compared to 58.4 today but the number of sales over the previous three months has fallen from 23.5 in 2007 to just 11.8 today. That’s less than three per month!

The Land Registry in it’s latest survey recorded 50% fewer sales in England and Wales and a whopping 59% fewer in London. From such tiny numbers it’s not surprising that the net balance of surveyors expecting sales to increase has risen from 35 to 40 but when it comes to house price expectations, the balance remains -11 negative although this is a smaller figure than the -42 in April. Most surveyors (who expressed a preference as they say) expect house prices to continue to fall!

Chartered Surveyors involved in selling houses may be very professional but they are businessmen none-the-less. They need more houses to sell and bluntly, they are less concerned about how much they sell each one for than that they actually start to sell a few. For them, the message they want to get out is that the glass is half full although this refers more to their prospects than their clients. Their clients should expect to sell for less.

The Halifax says that house prices are down 22.4% from the peak. Like RiCS, there are other serious commentators who are expecting house prices to fall further, some by as much as 18%. Not surprisingly, buyers are hanging back and those that are prepared to make an offer are being ruthless and are slashing sellers expectations.

The gap between average asking prices (Rightmove – £227,000) and average sale prices (Nationwide – £154,000) confirms that the balance of power remains with house buyers and it seems that Chartered Surveyors like others expect that prices will continue to fall as a result.