The only thing that can drive up house prices
If you want the price of your house to rise, you should hope for a real recovery in the banking sector. But with our big banks not much more secure than they were a few years ago, that's loking unlikely.
How desperate are you for house prices in your area to rise? Probably not as desperate as some of the property developers and residents of Poole.
In the last six months, says the Times, Poole Borough Council has recorded at least eight attacks on mature trees supposedly protected by preservation orders. Why? Because they block the view of the sea from flats set back from the coast. And a view of the sea is worth more than a view of a tree to a house seller often tens of thousands of pounds more.
Still, if Poole wants to see real long-term house price appreciation, it is going to have to hope for a lot more than a few dead trees. They'll have to hope for a recovery in the banking sector. Not a share price recovery, but a real recovery in the sector's balance-sheet health. And that doesn't look like it will happen at any great speed, if at all.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
As Graham Turner of GFC Economics points out, there are "huge funding and capital risks yet to be resolved", while the Bank of England "is clearly concerned at the risk of a double dip exposing an undercapitalised banking system while the fiscal purse remains so stretched."
The fact is that our big banks are not much more secure than they were a few years ago something that isn't going to be helped by them paying the bonus tax for their employees this year and that means they aren't going to be making much in the way of no-money-down, 100% loans any time soon.
They're also clearly not planning on making house buying as cheap as much of the population would like it to be. The Bank of England has kept interest rates on hold since April 2009 (at 0.5%) but the mortgage lenders haven't beenhaving any of it.
Instead, eight of them have increased their standard variable rates. Most now charge over 3% and many over 5% (a rate which suggests they would like their borrowers to just go away altogether).
Property markets are driven by the supply of credit and the price of credit. And right now, while things have eased since last year, that supply is tight.
Remember the peak of the bubble? Back in 2007, over £100bn worth of mortgages were issued in the UK. Last year up to November, that number was less than £10bn. The top of the market has been kept up by a large number of cash buyers and a shortage of supply, but that shouldn't last much longer.
At some point the cash buyers will have all bought, and sellers who have been holding back for fear of not getting a bubble price will capitulate, possibly in the face of the sudden realisation that the UK economy and its banks are in as much of a mess as ever. Then the odds are that prices will start falling again regardless of the views in Poole.
Sign up to Money Morning
Our team, led by award winning editors, is dedicated to delivering you the top news, analysis, and guides to help you manage your money, grow your investments and build wealth.
Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).
After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times
Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast - but still writes for Moneyweek monthly.
Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.
-
How ‘Bed & ISA’ could save you £15,000 over a decade
Moving your investments into a tax-free wrapper through ‘Bed & ISA’ transactions could save you thousands over the long run by cutting your tax bill
By Katie Williams Published
-
House prices hit record high, says Halifax
UK house prices rose 3.9% over the past year, with a typical property now costing £293,999. We look at which regions are seeing the strongest growth, and whether the rally in house prices will continue next year
By Ruth Emery Published
-
House prices to crash? Your house may still be making you money, but not for much longer
Opinion If you’re relying on your property to fund your pension, you may have to think again. But, says Merryn Somerset Webb, if house prices start to fall there may be a silver lining.
By Merryn Somerset Webb Published
-
Prepare your portfolio for recession
Opinion A recession is looking increasingly likely. Add in a bear market and soaring inflation, and things are going to get very complicated for investors, says Merryn Somerset Webb.
By Merryn Somerset Webb Published
-
Investing for income? Here are six investment trusts to buy now
Opinion For many savers and investors, income is getting hard to find. But it's not impossible to find, says Merryn Somerset Webb. Here, she picks six investment trusts that are currently yielding more than 4%.
By Merryn Somerset Webb Published
-
Stories are great – but investors should stick to reality
Opinion Everybody loves a story – and investors are no exception. But it’s easy to get carried away, says Merryn Somerset Webb, and forget the underlying truth of the market.
By Merryn Somerset Webb Published
-
Everything is collapsing at once – here’s what to do about it
Opinion Equity and bond markets are crashing, while inflation destroys the value of cash. Merryn Somerset Webb looks at where investors can turn to protect their wealth.
By Merryn Somerset Webb Published
-
Value is starting to emerge in the markets
Opinion If you are looking for long-term value in the markets, some is beginning to emerge, says Merryn Somerset Webb. Indeed, you may soon be able to buy traditionally expensive growth stocks on the cheap, too.
By Merryn Somerset Webb Published
-
ESG investing could end up being a classic mistake
Opinion ESG investing has been embraced with enormous speed and zeal. But think long and hard before buying in, says Merryn Somerset Webb.
By Merryn Somerset Webb Published
-
UK house prices will fall – but not for a few years
Opinion UK house prices look out of reach for many. But the truth is that British property is surprisingly affordable, says Merryn Somerset Webb. Prices will fall at some point – but not yet.
By Merryn Somerset Webb Published