Weak HIPs leave housing market shaky on its feet
There has been a late surge in the number of properties coming onto the market as sellers rush to beat the June 1st HIPs deadline. propertyfinder.com has seen a 4% rise in the number of properties listed on the site since the beginning of the month, and predicts HIPs will cause further disruption after their implementation.
Nicholas Leeming, director of propertyfinder.com, commented:
Our research carried out at the beginning of May showed there was a worrying level of ignorance in the general public regarding HIPs policy. However, we are now seeing levels of activity that suggests awareness has increased in the past couple of weeks.
This late surge will undoubtedly be followed by a drought come June and turbulence in the market will make it difficult to see the true effects of the latest rate rise. House prices have been pushed up by a chronic lack of supply. There is a worry that a further tightening of supply - as the market adapts to HIPs - will cause previously moderating house prices to spiral upwards again in the short term. This will cause difficulties for the MPC’s setting of interest rates – we can only hope that they don’t act prematurely. Borrowing costs are weighing heavily on people’s minds and it is only a matter of time before the market really begins to see the effects. It is vital that the MPC sit back and wait for the storm to settle. The housing market will need time to absorb four rate rises and disruptive new policy.
Table 1: Number of properties on propertyfinder.com - May 2007 
Confidence in house prices dented as borrowing costs bite
Confidence in the value of bricks and mortar still remains high but people expect house price growth to slow over the coming months. 83% of people say they expect house prices to continue to rise over the next year. However the extent to which people expect house prices to inflate has fallen this month from 6.4% to 6.0%.
Three quarters of people predict that if there were a fall in house prices, it would be due to rising interest rates and more than half of home buyers and sellers believe mortgages are unaffordable. Someone buying a home today will now pay over £140 more in monthly mortgage payments than a year ago - a crippling 19% increase.
76% of home buyers stated that house prices are likely to suffer because they are currently too high relative to income. CML figures show monthly interest payments on mortgages are now 17% of the average home owner’s income.Nicholas Leeming added that house price growth was set to continue but that financial constraints will begin to take their toll:
The housing market has experienced rapid growth in house prices over the last 12 months, and prices look set to continue to rise. However, there were signs that house price inflation was moderating, even before the May rate rise, and the latest move by the MPC is sure to impact further.
