Here we are again on a Friday being told by another survey from a property-orientated institution (on this particular occasion, the Nationwide), that house prices are rising at the fastest rate for three years. In fairness to the chief economist of the UK’s biggest building society he does point out that the annual figure has been boosted by a downturn in July 2012 which meant that the comparison was against a low base. (sic) According to his employer the average UK home has increased in value by £8563 since the end of 2012. If extrapolated down to the Cwmbran environ this means that for some or our bigger landlord clients they will have made over £100k in the first 6 months of this year. Mmmm… let’s look at the facts. House prices are still around 10% below the all-time highs recorded in 2007. So if you actually bought a property around the 2007/2008 period for around £170,000, your house on average is now worth approximately £17,000 less than you paid for it. We therefore need another 6 months of repeated growth to get these people back to the break even point. If you bought years ago, well before the peak and subsequent crash, it is party time again. It is also worth remembering that there is a huge difference between buying a property with a view to it being your home and buying a property as an investment. For many people reading this survey, its findings are almost irrelevant; they are first time buyers for whom taking a step onto the property ladder and finding somewhere to live is their priority, not how much money they are going to make some years down the line. For those first time buyers who may feel that they are going to find it even more difficult to find the funds to buy a property, help is apparently on its way in the form of the second part of the government’s Help-To-Buy Scheme. Through this scheme, first and second time buyers will be able to apply for a government guarantee for 15% of the value of the purchase price of the property that they wish to buy. As we blogged weeks ago, this runs the risk of inflating house prices as vendors are going to start pushing prices up by up to 15% as the view is taken that ‘well the government is underwriting it, so that’s ok’. Our view, which is reiterated by the Business Secretary, Vince Cable, is to think about what happens when the £130 billion allocated to this scheme runs out and perhaps even more pertinently what happens when the Help-To-Buy ‘followers’ start defaulting. Then the government help-to-buy scheme becomes the government have-to-pay debacle. Then we are back to the RBS, HBOS, Lloyds and Mack and Mabel situation that brought the world to its knees.
