22nd December 2009: PPR - Symptoms of recession to remain into 2012
Nick Hopkinson, Director of Property Portfolio Rescue (PPR), comments on the outlook for the UK economy and the property market over the next three years with stark facts that many are choosing to ignore:
- Symptoms of UK recession to remain into 2012 due to toxic mix of massive government debt, public spending cuts and tax increases.
- Property prices to remain static until 2012 due to restricted lending and diminished home buyer appetite for debt.
- Unemployment set to climb steadily to above 3 million and remain there well into 2011.
- Repossessions to average 50,000 annually over the next three years with the self employed and buy-to-let landlords particularly affected.
Symptoms of recession to remain into 2012:
“While the UK economy will most likely return to technical growth in Q4 2009, the symptoms of recession seem set to last until at least 2012. Spiralling UK national debt, tax increases and public spending cuts make this unavoidable, regardless of what the politicians may be forecasting. With a public sector pay freeze for millions of workers and VAT increasing to 17.5% next year, there is little realistic hope of a sustainable consumer led economic recovery in the UK any time soon.
“At PPR, we are worried that the unproven ‘economic medicine’ of Quantitative Easing will have unintended inflationary consequences, which could prove disastrous if interest rates have to be increased while public and personal debts are still so high. Appetite for mortgages and consumer debt will remain very subdued while these worries remain. There is also a high risk of further international shocks, such as the recent Dubai credit default, impacting negatively on UK business and investor sentiment as the global economy struggles to recover from the credit-crunch.
Property prices to remain static until 2012:
“2009 has been a difficult year, as rising unemployment and falling household incomes have left many homeowners struggling to meet their mortgage repayments, despite interest rates remaining at the lowest levels on record for eleven months.
“Although house prices and gross mortgage lending have witnessed some recovery in recent months from the lows measured at the beginning of 2009, the foundations for a stable market recovery are not yet in place and, realistically, the downturn is likely to be a protracted one. Outside London, the PPR Distress Index continues to record growing monthly enquiries from vendors looking for a fast sale.
“Gross mortgage lending is still 62% lower than at its peak in 2007 and is unlikely to return to pre-credit crunch levels for a long time to come. The disappearance of self-cert mortgages and rigorous regulatory approach to sub-prime lending means that the self employed and buyers without large deposits or immaculate credit scores will find it difficult to get loans for the foreseeable future. The restoration of the lower £125,000 stamp duty threshold from 1st January will also increase the pressure on homeowners outside of the capital. As a result, property values will fall further in 2010 before stabilising and remaining static until 2012.
Unemployment set to climb steadily to above 3 million:
“The PPR Distress Index predicts that unemployment will exceed 3 million by the end of 2010. Any recent good news stories about unemployment growing slower than previously forecast need to be set against a background of large increases in part time working and the mass pay freezes already seen. Unfortunately, this is reducing productivity and UK competitiveness and is not a long term solution for many employers in the current tough environment. Planned cuts in public spending and jobs will only add to the 2010 unemployment stats; the public sector has been propping up the job market till recently.
Repossessions to average 50,000 annually over the next three years:
“As a consequence of all these factors, this recession will record a higher number of repossessions than the last one, except over a longer period, averaging 50,000 annually over the next three years.
“The 2008 changes to the court procedures aimed at slowing the repossessions process down are only delaying the inevitable for many borrowers and the situation for struggling homeowners will only be exacerbated when the Bank of England pushes the Base rate back up towards the end of 2010.
“The self employed and buy-to-let landlords will be particularly vulnerable to repossession in 2010. With low levels of equity and few products available to them when they come to remortgage, many will be forced to stay with their current lender on unattractive rates.”
For further insight and commentary on the impact of today's news on the residential property market Contact us.
| Copyright 2009 - PPR Estates | Privacy policy | Term & Conditions | Site map |