Sell your tractor and go buy a house

That was the week in property, by Mike Hoffa
20th February 2012
There’s a very liberal type of outrage being expressed in many households at the moment.

Shock, horror, the price of diesel has hit a record high at 143.05 pence per litre, meaning it’s risen at twice the Consumer Price Index rate and it now costs you £114 to fill up the 80 litre tank on your commercial van, according to the BBC.

It’s apparently due to a perfect storm of rising crude oil prices, restricted supply and some refineries closing, although I have to say the term ‘perfect storm’ is overused these days and it seems to be rolled out as an excuse for just about everything. Struggling to lose weight? Ah – that’ll be the perfect storm of the gym being too far away, the corner shop having a special offer on crisps and that dodgy knee flaring up again.

“Nor are all the doomsayers who maintain that the UK property market has yet to crash even further and that you’re better off renting…”

However, the point is that those diesel-loving ecowarriors in their cardigans are finding it’s now quite pricey to fill up their people carrier and are not feeling quite so smug anymore (Ed – have you been speaking to Jeremy Clarkson again Mike?).

Nor are all the doomsayers who maintain that the UK property market has yet to crash even further and that you’re better off renting, because rents continue to go the same way as diesel. In fact, the Guardian reports that rents saw a rise in January for the first time since LSL Property Services started compiling its survey back in 2008. That’s not saying they haven’t risen for four years, but more specifically that they have never gone up in January before.

So what’s behind it all? Well, the Guardian puts it down to a number of factors, which can be succinctly described as a perfect storm of too many tenants looking over the Christmas period, not enough houses to go around and landlords needing more beer money. Okay, so I made that last one up but we all know you need three things for a perfect storm, otherwise it’s just a difficult breeze.

“…a perfect storm of too many tenants looking over the Christmas period, not enough houses to go around and landlords needing more beer money.”

But don’t expect it to change anytime soon. Supply and demand means rents are not going to drop in a hurry and the general consensus on the economy is that growth is going to be “sluggish”, suggesting low interest rates for some time to come and little sign of another big drop in house prices.

So if you’re sat there waiting for the price of houses and diesel to come down, I really wouldn’t hold your breath. If you don’t take action now you might be hit by a perfect storm of not being able to fill up your tractor, never owning a home and having to put up with me saying I told you so – and I wouldn’t wish that on anyone.

About the author:
Mike Hoffa has been working in the property sector for more years than he cares to remember, as a tenant, first time buyer, second time buyer, landlord, adviser and general trouble maker. He keeps his real identity fiercely secret, but some say he can often be found at the back of property auctions howling, but only when a full moon is out. He’s also rumoured to be of average height, weight, ethnicity and class, which he claims accounts for his inability to be politically correct or wear pastel coloured cardigans.

Mike’s question of the week: Time to call it a day on waiting for another crash?

The show must go on

That was the week in property, by Mike Hoffa

30^th January 2012

There’s a popular saying in the showbiz world, which is the title of this week’s piece. You’ve no doubt used the phrase “the show must go on” yourself at various times, given its ubiquity.

People use it in all kinds of circumstances outside of showbiz, but in essence it means exactly what it says – that despite whatever problems are going on around you, things need to carry on. It’s exemplified in all kinds of situations and is often seen collectively in populations during times of crisis. Just hark back to the Second World War – for a moment in 1939 everyone stopped, wondering what on earth was going to happen. But then, despite the chaos going on around the world and the threat of bombs landing for anyone in big cities, people just got on with things because work still needed to be done and food put on the table for the family.

“…realisation dawns that 2012 isn’t going to see a bumper recovery, but is instead going to be a hard slog.”

It’s a spirit I think we’re starting to see with the economy (I won’t use the word recession because we’re officially still out of that and I’ve been told not to by David Cameron), as the realisation dawns that 2012 isn’t going to see a bumper recovery, but is instead going to be a hard slog. So we might as well buckle up and get on with our lives.

The good news for first time buyers is that there are hints that the banks are starting to take this view with mortgage lending too. A number of news channels, including the Guardian, reported this weekend about how new figures from mortgage lender Halifax show that in most areas of the country buying is now cheaper on a monthly basis than renting. For the average three bed home, it now typically costs £600 per month in mortgage payments as an owner, or £716 per month in rental payments as a tenant – a significant 16% higher for renting. And it’s not just based on misleading overall averages either – this differential is reflected across the UK.

So the key question I hear you ask is “but how can would-be buyers see that benefit when they can’t get the whopping deposit required to buy?” Well, here’s the really good news – one of the key drivers of these figures is the re-emergence of 95% mortgages, helping more people get back on the ladder. For sure, the criteria will be pretty stringent, but it shows that banks are getting realistic about how much deposit the average would-be buyer is likely to have.

“…one of the key drivers of these figures is the re-emergence of 95% mortgages, helping more people get back on the ladder.”

Of course, the other factors driving this are continued low interest rates and rising rents. As the pendulum resets and more people move toward home ownership both of these factors could change, so this won’t be the status quo for long.

So why are the banks being so sympathetic, despite the gloomy outlook? Well, it could have something to do with all the billions of taxpayers’ pounds they received as part of quantitative easing and a quiet word about how they should really start lending it out.

After all, that saying in full is actually “the show must go on, otherwise we’ll have to give them their money back.”

About the author:

Mike Hoffa has been working in the property sector for more years than he cares to remember, as a tenant, first time buyer, second time buyer, landlord, adviser and general trouble maker. He keeps his real identity fiercely secret, but some say he can often be found at the back of property auctions howling, but only when a full moon is out. He’s also rumoured to be of average height, weight, ethnicity and class, which he claims accounts for his inability to be politically correct or wear pastel coloured cardigans.

Mike’s question of the week: Time for the banks to start relaxing mortgage lending?