Up next in 10
A number of mortgage lenders are kicking the their rates back up, with more expected to follow, as market conditions remain volatile due to the unfolding crisis in the Middle East.
HSBC UK has said it will increase some of its mortgage rates for first-time buyers, movers and re-mortgagers and the UK’s largest building society, Nationwide, also said it would hike rates by 0.25 per cent from Friday. Meanwhile, Coventry Building Society is also set to increase rates on Monday.
We spoke to property expert, Charlie Lamdin, Founder of BestAgent, about what these events mean for the UK housing market.
#iran #iranisraelwar #property #prices #mortgage #mortgagetips
Get more of City AM 👇
🌐 http://www.cityam.com
X(formerly Twitter): http://twitter.com/CityAM
Facebook: http://www.facebook.com/cityam
Instagram: http://www.instagram.com/city_am
LinkedIn: http://www.linkedin.com/company/cityam
Show More Show Less View Video Transcript
0:00
A week on, the consequences of US and Israeli strikes which killed Iran's ayatollah have been
0:05
far-reaching, with global markets convulsing at the prospect of all-out war in the Middle East
0:11
The expectation had been that inflation was going to settle back down to the Bank of England's 2
0:15
target this year, and that interest rates would be continually cut. But the geopolitical situation
0:21
looks set to change everything, with Qatar's energy minister warning that oil could hit $150
0:27
a barrel. This kind of energy spike could be highly inflationary, potentially leading the
0:32
Bank of England to hike interest rates rather than cut them. We're already seeing several
0:37
mortgage lenders kicking their rates back up. So to get into the weeds of what the crisis means
0:43
for the price of your home and your ability to buy one in the first place, I'm joined by the
0:48
property expert Charlie Lambden, who runs Moving Home with Charlie. So Charlie, first off, the
0:53
crisis, the war in Iran. What could this mean? How inflationary could this become
0:58
Well, first of all, for the housing market, it's just bad news, whether you're a buyer or a seller
1:04
because as if it wasn't already difficult enough to move house, the transaction time is taking
1:08
five, six months, keeping chains together. It's already hard. This just makes that worse for
1:17
everyone. So for people who are just moving because they need to move, because life says
1:21
you need to move, it's going to get harder. Even one week in, the ripple effects that we're already
1:28
seeing in the mortgage markets, potential inflation, the disruption to energy markets
1:33
that's going to cause a real wobble. It's probably going to snuff out any spring
1:40
bounce in the market people might have been hoping for. And actually, you know, legitimately hoping
1:44
for as well. Bit of activity pick up. I, for one, was certainly hoping for and looking forward to
1:50
So transactions are getting a bit easier, starting to pick up, because nothing lifts the economy better than increased housing transactions
1:59
And so I'm very disappointed that the hopes for that look like they have actually been extinguished
2:05
Just how long for is the question now? Yeah, mortgage rates almost immediately were jumping up
2:14
swap rates, which is where most of the mortgage market gets its money from
2:19
We're increasing inflation. And we've already got heating oil has already doubled in under a week
2:26
If you want to try and order heating oil if you're in a rural property now, it's doubled in price if you can get it at all
2:35
Part of me is still hoping this is just a little blip and a spike. And if this conflict ends within a couple of weeks
2:41
perhaps there's a chance of normality returning. But as you said, the Qatari energy minister has just said
2:48
even if this wraps up within a few weeks, the disruption to the flow of energy around the world
2:56
is going to be felt for some months. There might be a bit of confusion for UK consumers at the moment
3:00
They're looking at the picture in Iran, looking at mortgage rates going up and thinking there's real problems in the property market
3:06
But they'll also see reports from this morning that we've seen in the press about UK house prices
3:11
being at a record high. What do you make of this? Even if it's technically correct
3:19
that the average transaction value of one particular lender has reached a record high
3:24
for the whole of the UK, including Northern Ireland and Scotland, it's extremely unhelpful
3:28
and misleading when Scotland and Northern Ireland between them are about 5% up year on year
3:36
So that's having a massive overall uplift effect on that national figure
3:40
when in truth, England and Wales aren't seeing record prices or anything like it
3:46
So most importantly, I mean, I actually did a piece this morning on Fire Fact Friday about how
3:51
the ONS, if you look at it year on year prices, half the country's up slightly, half the country's
3:56
down. So just disregard a national average. Whenever you see a headline about the national
4:01
average house price, whatever's happening in the market, whether they're going up or down
4:05
it's never the same everywhere in the country. So always check your regional prices
4:09
Well, so obviously we're a London paper. And just to look more specifically at the London property market
4:14
I mean, just anecdotally, I've spoken to a number of people who've just seen the value of property they bought 15 years ago
4:20
say, even 10 years ago, flattened, or in some cases in real terms, drop
4:26
What's going wrong? So London is a complex beast in terms of property
4:32
So you got to separate out prime central London which is its own market with its own dynamics from the rest of London prime central London has had shocking price falls Belgravia Mayfair Westminster
4:47
you're talking about 25, 30, 35 percent nominal falls in flat prices and leasehold prices in the
4:54
last few years. Genuinely actual crash territory for prime central London. The whole of greater
5:01
London, it irons that out quite a lot. But then if you separate out leasehold prices from freehold
5:07
prices, London leaseholds have had a really bad run of it for about 10 years, in the last couple
5:13
of years especially. But if you're talking about terraced and semi-detached houses in the suburbs
5:19
of London, they haven't done as badly. They're not looking great. They're not been going up
5:25
but they have not been coming down. It's multiple different markets. And you mentioned before some of the really corrosive impacts that are had when it becomes more difficult, more onerous, more time intensive to actually move
5:39
And that being a real drag on the value of property when it just takes ages
5:47
What's happening there? What's going wrong in the chain, which is sort of creating a lack of liquidity in the market
5:52
Well, there's a long list of things, but the number one by a long way is, for a multiple
5:59
list of reasons, both estate agents and sellers being over-optimistic on the value of properties
6:07
when they bring them to the market. So you've got a lot of overvaluing and overpricing happening
6:11
And the cause for that lies in varying degrees between the agent and the seller
6:18
Headlines like we've had today don't help. So when people think, well, I just saw a national lender saying that UK house prices are a record
6:26
What do you mean? My house is, you know, it's very, very unhelpful when actually locally there have been genuine price drops of 15, 20 percent
6:33
There are London agents overvaluing by about 25 percent. And that feeds into the friction because you've got sellers sitting on the market for months wondering why the house isn't selling
6:42
Genuinely wondering why the house isn't selling. And you've got buyers thinking, well, there's no point in even viewing those properties if the seller's got that idea of a price
6:50
So they don't even get off the first starting block of a transaction is a viewing
6:55
Viewings are the lifeblood of housing transactions. Without viewers, you don't have a market for your house
7:00
So if you haven't got a market for your house, you're not going to get it sold. Now, if there wasn't such a big gap between seller expectations and what buyers are currently prepared to pay, transactions would shorten
7:11
There are other reasons. There are delays on the paperwork, the conveyancing, the legals, mortgage lenders doing down valuations, all these other things
7:17
people changing their minds, chains breaking to someone. There are sometimes legitimate reasons
7:22
why people say, actually, we can't move now. Those are frustrating. But overall, you add all those
7:27
things together, and we have the slowest, longest transaction times of any country in Europe
7:32
I think, for moving house. So just to bring in the rents' picture as well, because obviously
7:36
we're seeing now the rental rights legislation from the government come in. We're now seeing
7:41
quite a lot of buy-to-let properties are coming into the market. We're just seeing not the same
7:46
incentives to actually keep renting them out. So suddenly, a bit of a buyer's market. Why is it that, I suppose, estate agents haven't been able to keep up with this
7:54
sudden flow and this problem has just carried on? The thing that most people don't understand about estate agencies is that the number one
8:01
challenge all estate agents have is actually winning the stock in the first place. The
8:07
biggest battle they fight and where they put most of their resources is competing with other agents for the listing. And the easiest way to do that is to be over-optimistic on price
8:16
Now, this counts against them when they come to sell. So they're all out there
8:20
And because number one is I want to get the instruction more than any other agent, I'll worry about selling it later
8:25
And then I'll start telling the seller, oh, we've got to drop the price, got to drop the price, got to drop the price
8:30
That's what most sellers are unaware of, is that there is this real conflict between an
8:36
agent's interest in winning a property and an agent's actual chances of selling it. So when you've got all large estate agents and all the large lenders and right move saying record house prices, record house prices, record house prices, it's very easy to persuade the seller that the house really is worth 20% more than it's actually going to sell for
8:55
And so why do we have a buyer's market? There's a lot more stuff. Zoopla came out last week and said, I think, February was the biggest month for new stock coming to the market for over 10 years
9:06
At the same time buyer demand is down 8 on last year This week Bank of England said buyer new mortgage approvals 12 down on last January So buyer demand is falling away You asking why when prices are coming down it should be a buyer market
9:22
It is a buyer's market. The rise in unemployment is a real factor
9:28
You can't get a mortgage without a job. I think house prices would be coming down further if it weren't for lenders extending multiples
9:37
So they're now lending up to six times salary for a lot of people. That's helping soften the fall of prices in many cases
9:47
But actually, I think a lot of people are now scared of buying leases because of the uncontrolled service charges
9:54
So that's also been hitting leasehold flat sales, where a lot of buyers are just like
9:59
all I'm hearing is horror stories about service charges. I'm just scared of it
10:05
That shouldn't put all buyers off. There are leaseholds where actually it's perfectly safe, but there are some where it's really not
10:10
So you've got to be careful. But there's just more selling pressure than buying pressure right now
10:16
And when you look at average earnings, especially inflation adjusted wages, they've just been the last sort of 15 years has been pretty feeble for real wage growth
10:30
And so house prices have actually become more affordable. And so you'd think, hang on
10:35
First time buyers are at record levels now. So first time buyers are now 54 percent of transactions
10:39
which is good, but it would be a lot higher if employment was stronger
10:45
But with unemployment rising month on month on month, every single month
10:49
and we haven't even had the minimum wage increase that's coming in next month
10:55
that's going to hit unemployment even harder. And that, I think, is the biggest driver of house prices
11:00
is, you know, yes, interest rates are important, but only if you can get a mortgage
11:05
yes what would you like to see the government do to improve this picture scrap stamp duty
11:11
completely like permanently irrevocably for private individuals not for limited companies for private individuals moving from their only home to their next only home so not for second homes
11:25
remove this expensive moving tax it would really make so much it would make everything so much
11:34
easier. And it would breathe life back into the economy. You'd see transaction volumes pick up
11:40
Every time people move house, roughly speaking, 25 grand gets spent one off in the local economy
11:45
between the one off things that the seller pays for and that the buyer pays for
11:50
So getting transaction volumes up would more than offset the loss that the Treasury would see from
11:56
the loss of stamp duty revenues if they would just get rid of it. Even the Financial Times came out
12:01
yesterday finally agreeing with me that yes we should scrap stamp duty that's what i'd do if i'd
12:05
government i want to go back to a point you made earlier about particularly prime london house
12:09
prices and i mean the really striking uh sort of fall which probably does represent a crash
12:14
uh in those areas as you say like westminster belgravia it's become a bit of a perennial issue
12:19
which gets brought up sometimes but never really seriously debated i think which is what do you do
12:25
when you have quite so much central london housing stock just sat vacant is that something that
12:30
bothers you? Do you think that is, is that something we just have to work around? Can there be
12:35
yeah, can there be something done about that? Or is that just going to be a problem forever
12:40
Well, that's a really interesting question because, I mean, the central London
12:44
central London is its own unique market. The prime central London, I mean, right? The prime
12:49
central London is out of the reach of most people and always will be for most people, right? Prime
12:54
central London for the last 25 years have just been where the world, the world's wealthy have
12:58
bought their London pad, whether it's a flat or a house or whatever. And I've had estate agency
13:03
clients of my software in Mayfair for going back a long time. So I'm familiar with the Mayfair
13:07
market and how it works. And, you know, yes, it is used by people to park money. Overseas buyers
13:13
will park their money in central London property. It's amazing. Actually, you don't have a transaction
13:18
speed problem with those guys can buy and sell houses in a week. It's incredible. But with
13:24
vacant property more widely, yeah, there isn't, nationally there is not a housing shortage
13:30
There's an affordability problem. There are empty properties everywhere. There are, I mean, the London figures of where planning consent has been granted for building to start
13:41
but building hasn't started. There are over 200,000 dwellings where consent's been granted
13:47
and building hasn't started because there isn the demand for it So it misleading to say that there is a housing shortage There only a shortage of affordable houses And that a money shortage That a wage growth
14:03
shortage. There is actually enough housing stock. So is central London, the volumes of property in
14:08
central London are so small, they're not going to move the needle in terms of affordable housing
14:14
for low-income people. It's not going to make a difference. It's a great headline grabber. It's
14:18
It's not going to make a difference. It's not going to move the needle in terms of actual. You go to places like Lambeth
14:23
they've got tens of thousands of vacant council-owned properties. That might be an exaggeration
14:30
It's a lot. It's a large number. So there's a lot of mismanagement of actual council housing stock
14:37
So, yes, where you've got those vacant properties, a lot could and should be being done
14:42
And so just to clarify, so that's houses still owned by the council, not... It's both
14:46
some of which has been put into private ownership some of which is actually still in council ownership
14:51
so it's things like there are properties that they want that need to be refurbished
14:57
they're not quite up to standard the council doesn't get around to it for years
15:00
and they sit there empty and it's a completely avoidable problem it just needs to be better run
15:08
and better managed get those properties refurbished get people back into them but instead councils are paying private landlords
15:14
to stay landlords So we've got this sort of perverse situation where at the entry level where affordability affects the most people, the government is competing with private tenants for rental stock because it isn't maintaining its own rental stock properly
15:33
So there's this horrible failure where people think, oh, the government aren't building up houses
15:40
No, it's not. That really isn't the problem. That's a narrative house builders love
15:44
Oh, yeah, we are the answer. We just need to build more houses and everything will be fine
15:48
It's not true. It's not true. So what I think should happen, I think that levers should be pulled in the areas where the need is most acute
16:01
And this is around the country where there's private privately owned property that's just sitting empty long term
16:06
I think in the 2021 census, England and Wales, 1.3 million long-term vacant homes
16:15
Wow. Just sitting there. Not second homes. Long-term vacant homes. People go, well, it's my property
16:23
I do what I like with it. You know, there are people who inherit staff, can't be able to deal with it. There's always a story behind it, right
16:30
There are things that the government could do to bring those properties back into circulation
16:34
You could just incentivize it. OK, you're going to have to pay slightly higher tax if you leave it there empty
16:40
For longer than a year, you want to have it empty for a year for refurbishing, whatever, then that's fine
16:44
More than a year, we're going to start to apply a bit more tax. Or we're going to say, you've got to put it on the market and rent it out
16:51
Or we're going to commandeer it and rent it out. It's still yours, we'll pay for it, but you can't not rent it out
16:57
Has that model been tried before? No. I mean, these are just wild suggestions
17:02
But my point is, you just need to create the incentive. You don't need to be, you know, I'm not talking about forced acquisitions or stuff
17:09
but there are properties out there where someone owned them, someone's died, no one's dealt with it
17:15
It's just sitting there. And there are people trying to bring those empty homes back into circulation
17:20
So it is not that we're not building enough houses. We're never going to build one and a half million houses in this parliament
17:24
I mean, hell will freeze over before there's any chance of that happening. I suspect, my prediction is that they will build about half their target in that period of time
17:33
The right solution is to build social homes. The government to build its own social housing, keep it and use it to meet its obligations and to stop competing with private tenants for private sector homes
17:45
I suppose to bring it all back to the initial point about Iran, I suppose I'm struck just by how much unemployment figures into this and how whenever we talk to businesses about hiring, they always say, for us, it's the volatility, it's these shocks
18:01
this just feels like another thing that is going to depress the market of people who can actually
18:05
buy houses and that's that's really worrying but that's all we've got time for uh today charlie
18:10
but thank you so much for joining us and we'll have all sorts of coverage on everything from
18:14
the property market itself to the pretty insane aftershocks we're seeing from the ongoing
18:20
conflicts in the middle east so stick with city am for everything you need to know on all of those topics
18:31
you
News