As many of you know, I am always trying to educate myself so I am in contact with realtors all over the world. I was speaking to an estate agent in the UK recently and we were discussing the market and here are his comments on the market there.
The number of homes sold in the UK in the year to October 2010 was just 53% of the figure in the year to October 2007, according to the Royal Institution of Chartered Surveyors. The credit crunch has radically altered the type of buyer who is able to move by obtaining a mortgage; whereas in 2007 some 40% were first-time home buyers, now fewer than 20% are buying their first homes. Instead the majority of those who can obtain mortgages from lenders are typically existing home owners who have equity in their property and are considered low risk. Young buyers with no equity are thin on the ground, while most of those buying and selling are older and wealthier. The reason for this is simple: The downturn is not a temporary phenomenon but a permanent change. The current low level of transactions will become the new norm. The younger and equity poor households will be confined to the private rented sector or reliant on shared equity schemes for the indefinite future. If they do buy, they will do so only later in life – in their 30’s or older – and would skip what is referred to as a starter home. This will make the private rental sector far larger than now 25% of housing stock within a decade ( from the 14% now). This will cause a shift in how we look at rental units ie capital growth vs capital yield as well, or perhaps instead of capital appreciation.
Could this happen here in Red Deer? I believe the answer is yes based on the mortgage qualifying changes of a couple of weeks ago, and anticipation of mortgage rates increasing in the latter part of this year to counter the expected inflation. Will oil price increases help offset some of the drag on our local market?
Extract of the Red Deer Advocate