Ups and Downs for UK Housing Market

New House Reservations Up by 34%

First the good news.

In yesterday’s Independent newspaper housebuilders, Barratt, revealed that at the beginning of November their forward order book stood at £846.6 million, compared with £817.7 million in 2008.  It must be true – it said so in the Financial Times too!

Barratt, the UK’s second largest independent housebuilder when measured by market value, said that net private reservations for its sites were running 34% ahead of the same time last year.  However, once again, words of caution appeared in what was otherwise positive news when Mark Clare, the company’s chief executive, warned:

While trading conditions in the housing market have improved, activity levels will remain constrained until the availability of mortgage finance increases, particularly at higher loan-to-value levels.

Barratt’s main competitor, Persimmon Homes, who are number one in terms of market value, issued a similar statement at the beginning of the week, reporting that their forward order books are also well ahead of last year.  In the words of Persimmon Chief executive, Mike Farley:  The market is encouraging. Buyers are back.

UK Housing Market May Not Recover Peak Until 2014 

However, in a report issued today (20th November) nine of 14 economists and estate agents surveyed said they foresee a decline in 2010 after a surprise rebound this year. They predict an average drop of about 1.6 percent, with estimates ranging from a loss of 10 percent to a rise of the same magnitude.

Seema Shah, a housing economist at Capital Economics, said that prices needed to fall a further 20-25% to get back to their long-term trend.  She is of the opinion that the 7%  gain in average prices since April has beend riven by a shortage of properties for sale.  It won’t be sustained, she said.