A prominent economic forecast group has warned that the recent upturn in the property market may only represent a ?false dawn?. The Ernst & Young Item Club has said that it could be another five years before property values return to their 2007 levels, BBC News has reported.
Nevertheless the latest figures from the Council of Mortgage Lenders (CML) show a continued upturn in lending, with the number of loans for house purchases 19 per cent higher in July than a year before. The CML said the figures showed the ?first annual material growth? for more than two years ? just before the credit crunch hit the market.
CML economist Paul Samter said that it might be tempting to say the mortgage market had turned and he did agree that there was concrete evidence of an increase in lending for house purchases. ?But,? he continued, ?there are still constraints affecting the lending industry?s capacity to fund increased lending, as well as less consumer motivation to remortgage for the time being.?
The number of new mortgages was 56,000 in July, up 24 per cent from June, but the Item Club?s view was that the average house price increase this year has been mainly due to a shortage of available properties and a limited number of ?cash-rich buyers?. The Club?s economist Hetal Mehta said: ?The supply of these funds is limited, which means prices are likely to dip again in the first half of next year.?
There is still a lack of mortgages and property for first-time buyers.
The Item Club said: ?The scarcity of mortgage supply and tough lending criteria is making it particularly difficult for first time buyers to enter the market. Given that they typically purchase cheaper properties, this will have significant implications for those looking to trade up, clogging up the market and limiting the number of transactions taking place.?
