Property Market Report by Stuart Ross

Recent headlines have been dominated by news of the continuing credit crunch, highlighted in the UK by the troubles at Northern Rock, and dramatic swings in the stock market. While the stock market often bounces back within a couple of weeks the dent in people’s confidence can last considerably longer.

The tangible effects of the credit crunch have been felt in recent weeks with many of the banks tightening their lending criteria. Those affected most are buyers with small deposits or no deposit at all. The 100% or more mortgage is being phased out and buyers with deposits of less than 10% are being quoted significantly higher rates than a year ago. First time buyers will be worst affected.

Despite the significant drop-off in new sales being agreed in Berkshire prices have been holding up reasonably well. The interest rate cuts in December and February were a welcome respite to borrowers but what’s really underpinning prices is the continuing shortage of new properties coming on to the market. When confidence is low the default position is still “wait and see”.

It was feared that the buy-to-let market would be the first sector to be hit when prices stalled. With the outlook for capital growth unclear and rents struggling to cover mortgage payments leaving the cash in the bank starts to look more attractive. The news on that front is still contrasting.

While the number of buy-to-let loans being taken out continued to rise through to the end of 2007 recent figures from the RICS showed that the number of properties being made available to rent by Landlords fell towards the end of last year, the first fall in ten years. It remains to be seen whether the move to a flat rate of capital gains tax in April will give investors the extra incentive they have been waiting for to cash in.

While confidence is likely to remain low in the coming months prices should continue to hold up until there are more forced sellers in the market. That is unlikely to happen with interest rates at their current levels and, by and large, people feeling secure in their jobs.