News

Market Update

Now that the election is over we are seeing more interest in property, viewings are up which in turn will result in sales at some point.
Property is also expected to feature strongly in the Queens Speech today, mostly rental and starter homes, but any help would be gratefully received. First time buyers are still struggling to get that foot on the market, what was the traditional first time buyer’s property is out of their reach and being snapped up by the Buy to Let Market. This has always been a strong market in the UK, but since the recession it has taken off dramatically.  Initially due to the Mortgage Market Review, making it more difficult for first time buyers to get a mortgage, at the same time buy to let was unregulated. This has now been addressed, but house prices won’t come down because banks have decided to lend some money. Indeed the lowest ever fixed rate mortgage of 1.07% hit the streets last week, but the lender is not being overwhelmed.
We are now heading towards £1 Trillion of property owned by the buy to let segment. That’s a lot of first time buyer homes unavailable to the market and forcing the price of that segment up. Alas it is having the opposite effect on the middle market segment. Tenants and Landlords don’t move up market!  
Below is a graph showing the growth in the buy to let market.

Value of buy-to-let properties about to top £1 trillion

Equity markets are also rebounding as the economy grows stronger. The one big shadow on the horizon is Europe and in particular Greece. It’s amazing that such a small economy can have such a dramatic effect on the whole of the Euro area and World markets.
It’s not so much the figures or the long term potential that’s having the impact, more the Euros inability to deal with the problem.
Greece owes the International Monetary Fund (IMF) 20 billion. 1.6 billion Due next month. Notice I don’t use a currency symbol! That’s because the money owed is “Special Drawing Rights” a “virtual reserve currency”. The figures depend entirely on the exchange rate, the Euro is in a bad place at present and as soon as you mention Greece lenders run a mile. So what is the exchange rate at any time and what is the true cost to Greece?
They have lost access to Bond markets and therefore cannot raise money on its own, it can only access “bail out loans”. Would you lend to Greece? So it follows that these are hugely expensive loans. A bit like paying your mortgage by borrowing on your credit card.
It’s thought that Greece could stay afloat until the end of June.
What happens if Greece defaults is the real worry to all. It would start a process of “Cross default and Cross acceleration”. A default on an IMF loan would trigger a default on all other loans (cross default) this in turn would mean all other creditors would ask for all loans to be returned, (cross acceleration). Obviously it is impossible for Greece to repay everything at once, but if the creditors don’t lodge their claim they could lose out in the long term.
That raises the question, what happens in a Country, when no one can bank or draw money, not receive any salary, no business can trade without a bank account. All on our door step and 60% of our exports go to the Euro zone. Small as Greece may be, they are having a huge impact on our economy and there is worse to come.