Property Review

28/1/11

In December, there were mixed messages of falling prices in the North of England and slight increases in prices in the South. 2011 will see the policies of the coalition Government bite and in many cases this will be very hard. In the last quarter of 2010 prices on the Isle of Wight averaged £157,500 with the volume of sales peaking in October.

Signs of any recovery in the property market make quite bleak reading in the general market. Mortgage lending remains pitifully low. Mortgage approvals for home purchases during October and November 2010 were around 47,185. This has been one of the lowest amounts for some considerable time.

70,000 to 80,000 were hoping to get mortgages during this time, therefore, indicating that the market is somewhat skewed.

New mortgage lending dropped from £1bn in October to £700,000 in November 2010, as home owners try to cut debt. Obtaining mortgages in the future is likely to prove to be difficult with banks and financial institutions finding all sorts of excuses not to lend, even to first-time buyers.

The Construction Industry is already badly off and this has been made worse by the recent weather. Housing starts last year were the lowest for several generations.

However, the picture over the last 3 months is that we have seen some signs of light.

Firstly, there has been an interest for the first time by National House Builders on the Island and regionally, to take up options and to do deals, taking the long-term view with building up a land bank for the next 3 to 5 years. This was something they did not do pre-credit crunch. Obviously, this land provides opportunities for the future, including the provision of affordable housing on larger scales.

For the first time since the credit crunch, local developers are starting to buy smaller sites, either from frustrated sales or by banks. These are being purchased as cash deals, or where banks are prepared to fund, they are asking for the introduction of equity of between 40% and 50%. These sites are for numbers of between 2 and 10 units, where there is no provision of affordable housing.

With the demise of public funding for affordable housing on the Island, there are changes coming forward through this practice, which hopefully will provide affordable housing, via the private sector and which can be seen as investment opportunities.

This new approach has been examined thoroughly and test by the Planning & Development department within Christopher Scott and will result in new situations coming forward, based on the private sector, rather than the more organised public sector, i.e. housing associations.

There are still, also, cash purchasers around, or bank bonus purchasers, who obviously are interested in buying the house of their dreams. These purchasers are largely unaffected by the current economic climate and are buying up homes or projects through our practice. We, believe at, Christopher Scott that this will result in a good activity at levels of between £500,000 and £2,500,000.

2011 will provide a year for opportunity and challenges, which I hope will benefit all of our clients.

Happy New Year

Christopher Scott MRICS, Chairman and Managing Director