What Did The RICs Report Really Say?
The media has pulled a few key statements from the Royal Institution of Chartered Surveyors (RICS) recent report. This is leading to confusion and panic in several published reports. However, a visit to the RICS website reveals a more optimistic outlook for UK mortgage holders.
While the RICS report does explain that the housing market has fallen to its lowest point since 1992, it continues to explain that the UK is not experiencing the same economic factors that were present in 1992.
There are some major differences. The first difference is that today's unemployment rate is at a 30 year low. Despite the credit crunch and panic, City bonuses are almost unchanged from 2007.
RICS reports that repossession rates will climb from 30,000 in 2007, to 45,000 in 2008, far lower than the early 90s when repossessions rose to 80,000.
The banks are working to improve their profits. HBOS reported that they will increase their loans by 25 basis points. Despite this, the impact on 1.4million mortgages will not be anywhere near as drastic as it was in the recession of the 1990s.
One major difference is that the buy-to-let market that was non-existent in the early nineties has increase to 12 million outstanding at the end of 2007. This represents 10% of all mortgages. This has established a solid rental market, with enough competition to keep rent prices down. While some new landlords have panicked and sold their properties, most still report earnings from their property portfolios.
This time the Bank of England is working hard to counter any threat to the economy. This is good news for mortgage holders.
While the price of homes is dropping, it does not necessarily signal a full recession, or offer any suggestion that house prices will not increase again within the next few years.
Published on January 23, 2008
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