So the media band wagon begins. Confidence has a big part to play in the housing market. So are we all wishing for a crash, or do we want more realistic house prices. The danger is people will start to believe the hype. House price growth is slowing, high street confidence is suffering but what are the facts.  

House price growth this year was recorded at 8.1pc over the last 12 months. The last few months have been more volatile so its hard to get an accurate measurement yet. This due to buyer caution and the negative media headlines. There will be some good opportunities in the coming months as vendors need to move and developers need to achieve sales by offering incentives. This will start to show in house price indices. Better prices will reflect better yields for buy to let mortgages and potential growth over the next few years. Short term wobbles in the market will be ridden out by professional investors.

Which way will rates go?

The market fully expects bank base rate reductions of up to 0.75pc over the next year. If this happens, professional investors using base rate tracker mortgages can expect substantial buy to let mortgage cost reductions over the coming months and rates of around 5pc are likely on many products, before fees. 

Will rents rise?

According to recent RICS, ARLA and Paragon surveys, rents are already up. London rents are already at 15pc and, as usual, this is likely to be preceding significant growth in the rest of the UK regions.

What’s driving growth?

First time buyer mortgages have dropped from over 20pc of the market to less than 10pc. Homebuyers are buying in less but still at a greater rate than property coming on the market. This represents a substantial number of people switching from buying to renting and a disproportionate number of smaller households resulting from frustrated first time buyers unable to get onto the ladder. This will lead to substantial growth in rents for flats and terraced property.

Undersupply or oversupply? 

Government’s increasing targets for new housing indicate there is a massive undersupply of property in the UK. The talk of oversupply has referred mainly to rented flats in city centres. However, it is now becoming clear that this was a relatively small oversupply and agents in many cities and towns are reporting strong rental demand surges and a rapid reduction in rental accommodation available. Even city centre flats are recovering and rental demand is so far boding well for strong rental growth in the future.

Inflation? 

Competition between the supermarkets will keep inflation under control, oil prices are now dropping and average inflation for the last three months has been bang on target, at just below 2%. Clearly interest rates are now starting to lower following a sharp fall in inflation over the last few months. The Bank of England is on target.

Population & immigration?

Government figures suggest the population will grow 4.4 million by 2014 - that represents an enormous extra demand for housing when there is already a shortage.

Should I buy? 

Rents are rising and opportunities exists to use the current fearful market to your advantage, buying at better prices than has been possible for some years, from forced sellers (some developers and people who need to move house very quickly). Buying cheaply in a strong rental market will significantly enhance yields for buy to let mortgage investors and allow mortgage costs to be covered relatively easily and relatively quickly.

Professional investors in any market act against the crowd. This is the opportunity to think like a professional investor and buy at a time of market pessimism, with a 10 to 15 year plan. What is more, rents will pretty much cover your mortgage straightaway with strong returns already being reported.

The Fed is under pressure to ensure they help borrowers with poor credit sub prime loans. The downturn in the housing market has triggered a downturn in the US housing economy. People with bad credit mortgage loans will struggle when there rate is reset to the new present rates.

The Bush administration acted earlier this month to help bad credit mortgage borrowers amid fears the spiralling housing market could erode consumer confidence and push the US into recession. It announced a five-year freeze on interest payments for certain bad credit mortgages.

According to research from the Mortgage Bankers Association, the number of foreclosures on sub-prime adjustable loans hit record levels between July and September.

Hear are some of the new proposals which could come into force next year; 

• Lenders could not agree loans without proof of income
• Borrowers must set aside money for taxes and insurance
• Lenders would have to make financial disclosures earlier
• Certain forms of advertising would be banned
• All loan rates must be displayed prominently, not just introductory or so-called “teaser rates”

The treasury has extended the guarantee at the request of the lender. 100% Mortgages lender Northern Rock needs the funding to survive into the New Year. The Treasury’s announcement means that most of Northern Rock’s balance sheet is now covered by government guarantees.

According to Mervyn King, the governor of the Bank of England, the additional guarantees amounts to an additional 30% of the Northern Rock’s balance sheet.

Northern Rock ran into difficulties during the recent credit crunch.  The lender is renowned for lending high risk 100% mortgages that have fuelled the crunch. Unlike most banks, which rely on savers’ deposits to fund mortgages and other loans, Northern Rock borrowed heavily in credit markets, to offer these high borrowing levels of 100% mortgages.

Tough market conditions have triggered the fall in house prices. Many first time buyers who in recent times have opted for a 100% mortgage are finding it difficult to secure a mortgage. 100% mortgages criteria have tightened to the point where some lenders don’t want your business.

Asking prices were down 3.2% from November. London suffered the biggest drop of 6.8%. Recent indicators have suggested the housing market is cooling, with the Halifax recently reporting sale prices falling in each of the past three months.

The average house price has dropped more than £7000 now to £232′396. “The substantial drops in asking prices are further confirmation of the underlying trend of more sellers re-adjusting their prices downwards to try and tempt buyers in deteriorating market conditions,” said Rightmove’s commercial director Miles Shipside.

Now the bad credit mortgages crisis has taken it’s effect on house prices. With inflation set to slow even further, credit will be harder to get and putting it past most peoples affordability levels.

Confidence in the housing market is at a ten year low report the estate agents. Its not so much Hip Hip hooray just more layers of bureaucracy.

HIP’s are compulsory for house with 3 or more bedrooms. But from tomorrow they are required for smaller home as well. Packs typically cost £300 to prepare.

The packs are seen as adding extra layers to the house buying process that isnt welcome. The Royal Institute of Charted Surveyors have reported price falls four months in a row. They also found that only 1 percent of buyers ask to see a HIP .

First time buyers who may want to move up the ladder will now have another cost from tomorrow.