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Money Week Poo Poos Housing Revival

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The housing market revival continues, apparently.

The Royal Institution of Chartered Surveyors says that house prices rose again in February. The gains were driven mainly by an improvement in the London market. Surveyors were at their most positive since June 2004.

And yet the UK economy shows no signs of improvement. Retail sales growth in the three months to February came in at an anaemic 0.5%, compared to 1.3% in January. And firms continue to lay off staff left, right and centre – insurance group Axa Sun Life now plans to cut 350 jobs in Bristol and Coventry.

So what’s going on?

The latest RICS survey and several other housing market surveys have suggested that house prices have perked up since the beginning of 2006.

But if the property market is improving, no one has told DIY and flooring retailers. Earlier this week, laminates and wood flooring specialist Floors 2 Go saw annual pre-tax profit fall by 50% to £3.2m during 2005, and said that sales excluding new stores were down 16% in the 10 weeks to March 10.

And the team at think tank Capital Economics argues that sales of household goods aren’t going to get any better. One of their main reasons is that “if new buyers are having to stretch themselves more than usual in order to afford to buy a new house, they will have less money left over to fit out their new homes than in the past.”

And interestingly, despite the general downturn in newspaper advertising, Daily Mail and General Trust reported this week that property advertising revenues have risen. Despite what you may think, that’s not a good sign for the housing market. When the housing market is hot, estate agents don’t have to spend as much money on advertising houses because people are seeking them out. It’s when the market slows down that they start having to push their wares.

But let’s assume the statistics are correct, and that the housing market is perking up. Why is it happening, and how long can it last?

The first point to note is that most of the recent upturn has been concentrated in the London area. That suggests that the pick-up in the market is partly a result of the City bonus season delivering a fillip to the higher end of the market.

But a more important aspect is that despite record bankruptcies and rising unemployment, lenders have actually relaxed lending conditions, with many mainstream lenders looking for growth by targeting higher-risk markets.

Just last month, Alliance & Leicester announced it is to enter the buy-to-let and “sub-prime” market, while Nationwide’s specialist lending arm UCB Home Loans has raised its maximum number of buy-to-let properties per borrower from two to ten, while its maximum loan has increased from £600,000 to £3m.

So does this mean we should all be borrowing as much as we can and piling into the housing market? Of course not – because it can’t last.

We’ve recently received an excellent letter from one of our readers – an estate agent, of all things - on this topic. You can read it in full on the Letters page on our website

See http://www.housepricecrash.co.uk/forum/ind...showtopic=26214

for letter from estate agent.

Edited by Baz63

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Yes, I agree with many of the points Moneyweek make.

However, I hope their real estate forecasts are better than their stance on equities!!!

I know lots of correspondants here revere the perma-bears over at Moneyweek but from what I can see they're like a stopped clock. It's like me saying I'm going to die one day in the future - yeah, but WHEN! Meaningless predictions are their stock in trade, I'm afraid.

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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