House prices 'bouncing back'?

Ive just read a report today saying that the Bank of England are astounded at the property market rebound. The Banks Chief Economist, Spencer Dale, admits to 'being surprised in the strength of property values'.

There are most certainly lots of signs of confidence returning to the market. For example, The Halifax report that the average house price now stands at £161,000 - this is the same level as ten months ago in December 2008 - and its rising now month-on-month - this certainly isn't a 'blip'.

Home loans are increasing month-on-month currently. HSBC today announced that they consider the housing crash to be over - and promptly made half a BILLION pounds available for a new 90% loan product. It's enough finance for about 3,500 typical, average priced, property purchases.

This means that those people who sign up for this product only then have to find a 10% deposit. This for me, is a, massive, sure sign of confidence returning. OK - the bank gets some headlines by making this move - however they wouldn't earmark for lending £500m just so they could get some free headlines - especially after what has happened in the last 12 months!

It's a public announcement that they're 'back in business; and are ready to lend at very generous loan to value ratios.

This is the type of move that will give HSBC a 'slug' of easy market share - market share that has been going begging for over 12 months. The banks have had to stand back and watch the game from the sidelines whilst they got their confidence and funds back in place.

People will be flocking to sign up to this product. The product will steal business from their banking rivals. This type of activity puts pressure on other banks - who also will feed off the confidence that HSBC are openly displaying - to copy them in retaliation. This is nothing more than basic economic theory coming into play, in practice, as we come out of the recession - and the banks (who are very greedy - remember?) want (have) to make money.

Other recent economic indicators show that economic output fell less than had been predicted - meaning that, quite simply, things have not got as bad as was previously feared. This is also a strong indicator that the nation's economy is improving.

Unemployment is still rising - but on the other hand, for every person out of work - there are around another 9 who aren't! Many of these people are paying their lowest mortgages ever as tracker rates and low standard variable rates work very much in their favour.

This means that they have more disposable income. Incidentally, at the end of any recession, historically, unemployment continues to rise for about 18 months from the point of the slump ending - its obvioulsy simply a natural economic phenomenon that just 'happens'.

However, it appears that this windfall money that individuals are gaining each month isn't being spent - yet!

Another report by the Office of National Statistics, (ONS) says that personal savings are increasing rapidly as fearful individuals 'feather their nest' following the recent gloom and doom. The 'savings rate' - the % rate of what people save as a proportion of their disposable income is at its highest rate for nearly 7 years.

Historically, Britain doesn't appear to be a nation of savers - certainly not in the last few years. I think that much of this hoarded cash will soon be spent- when confidence returns totally. People will have the confidence to spend this hoarded money - as they feel a little more confident and finally decide to treat themselves with some luxury purchase or other.

Whats the point of all of this from a property angle?

Well, to me, in my humble opinion, it simply appears as if a combination of more lending (at better LTVs and rates), increased consumer confidence, along with people realising (because the media is now telling them!) that the property market has fallen as low as it will - make those who have been sitting on their hands, waiting for matters generally to improve - to take the plunge into the market.

In some parts of the country, housebuilders are saying they are being caught out and running short of completed stock to sell as a result of winding up their operations on many sites in the last 18 months. It will take them a while to 'gear up' again. These shortfalls in supply help to fuel property price increases too.

The fact that the population constantly increase by at least 400,000 people each YEAR means that housing stock is going to be under constant pressure - literally for ever. Remember, as a nation, we don't have enough properties now - so imagine the impact of a growing population - compounding over time!

To conclude, from an investment point of view, I am confident, based on external factors, that prices are rising again - and therefore property will be more expensive for collectors (investors)to 'collect' - the longer an individual leaves it to buy now.

OK - if you buy a property in 12 months time - as opposed to buying it at today's price, you're going to more than likely pay considerably more - but - wait ten years and you will still be a winner anyway. However, buy it now at today's price and you'll win even more!

There are very few times in the property price cycle that one can call a peak or trough - but I feel that we are probably in a point in time now where that is possible.