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False picture of property recovery emerges

Tuesday 20th October 2009

Enquiry levels from distressed sellers have jumped in September as homeowners return to reality after the summer holidays, according to Property Portfolio Rescue.

Individuals, landlords and small businesses are being forced to sell their home or residential property assets to avoid future repossession or bankruptcy, said the firm.

Distressed seller enquiries from homeowners in major cities in the Midlands and the North surged by more than 60 per cent on this time last year, as recorded by the Distress Index in Q3 2009. Many urban homeowners throughout the UK are seriously suffering financially, suggesting that any talk of a market recovery is London-centric and is not the reality facing the majority of homeowners, said the firm.

Nick Hopkinson, director of Property Portfolio Rescue, said: “Recent property surveys reporting a house price rally are based on very low transaction levels and cherry picked lending to high earners with huge deposits. Unfortunately, this is creating a false picture of recovery. While shortage of property stock within Greater London is pushing up prices at the moment, the UK as a whole has not seen positive growth and many homeowners are increasingly facing negative equity and difficulties remortgaging as they come off fixed rates. Many mortgage brokers are contacting PPR because their clients can’t get a re-mortgage and need to sell fast.”

PPR recorded a record number of enquiries in September, with well over 3,000 distressed sellers making contact this quarter. The slight dip in repossessions in Q2 is a result of the political and financial pressure on banks to hold off possessing properties, as well as the Government’s Pre-Action Protocol changes, said PPR.

But the firm added that means the trouble hasn’t gone away. The current number of mortgage loans in arrears is 30 per cent higher than a year ago at 402,640 indicating that repossession is merely being delayed for many.

Hopkinson continued: “The enquiries data shows that, faced with continued rising unemployment across all sectors, reduced household income and little appetite or ability to get mortgages from potential buyers, many homeowners are currently seeking help in securing a fast sale of their property. PPR anticipates continuing high levels of enquiries this winter against this depressed economic background.”

The firm said that based on the available evidence, it is clear that the current downturn is set to last well into next year. The Government-backed initiatives and quantitative easing have done little to increase the availability of lending to businesses and individuals, which remains almost non existent.

The London property market has been propped up, mainly by foreign cash buyers, but this is little cause for cheer outside Greater London. On top of this, we can expect substantial cuts in public spending, a public sector pay freeze for millions of workers, the reinstatement of 17.5% VAT and the return of the lower £125,000 stamp duty threshold from 1st January 2010.

Hopkinson added: “Over 70 per cent of households are not in London and continue to face falling house prices with little sign of their recession ending.”

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