The Business News Source

The UK has always been attributed with grey boring weather even though the Brits are famous for making as much conversation about it as possible. Well over the last few years the Brits have had much to talk about, with the hottest and wettest months on record. Recent floods have delighted the British chattering classes even more with speculation that floods across the country will impinge on that other favourite British subject - house prices.

 As the waters slowly recede it seems that the worst floods in recent history have exposed a major problem with housing in the UK - it’s mainly built in flood plains - recent bad weather has caused billions of pounds of damage across the country, with the likelihood of more to come as global warming kicks in.

The trouble is that the insurance companies are not happy about footing the bill and so premiums will increase dramatically - in many cases whole areas will be blacklisted and will not be insurable - problem - no insurance, no new mortgage. Estimates are that this will lead to a drop of up to 80% in housing value in the affected areas.

This comes at a time when confidence in the housing market is starting to wobble (although only slightly thus far) due to the prospect of higher interest rates. The government may have to bail out householders, but even if it does (by forcing insurers to provide cover as before) there are likely to be concerns by potential new buyers that the floods are here to stay.

 The effect of have a significant drag on prices may ripple through the market as buyers lose out on equity they thought they had, or new buyers hold off for a few years. Either will cause a depression in the market in the short term.

Meanwhile, off course this may mean that other prices increase as people choose other regions to move to, away from the risky flood plain areas - putting pressure on prices.

More likely, is that the underlying  confidence in housing may be pricked as people begin to realize that the term ’safe as houses’ really has no meaning.

It’ll be an interesting summer as people watch interest rates and house prices in the affected areas.

Our betting is that this will increase slowdown in the market and could well see an end to the extraordinary love the Brits have for houses.

From the Sunday Times -

Chris Jordan at Bureau Insurance, a specialist broker, said: “Those who have been hit by the recent floods won’t have problems now; it’s when they come to renew their insurance or sell their houses that they’ll face big problems. Hundreds of thousands of people could be stuck with homes they can’t sell because they are refused insurance.

More than 250,000 properties are situated in high-risk areas and could therefore be caught by this opt-out in future.

The Royal Institution of Chartered Surveyors said: “Buyers need buildings insurance before lenders will grant a mortgage, so uninsurable homes could be rendered unsaleable. This will have a knock-on effect on the value of the property, leading to a reduction in value of up to 80%.” 

If you think the world has gone crazy well check out Australia where house price inflation and huge debts have resulted in  about a third of the population not expecting to afford their first house until they’re forty years old. For those in the UK (especially) London this may not seem to be a surprise.

The dream of owning a home is slipping further from reach of many Australians.

A survey shows more than a quarter of potential mortgagees will be in their forties or older before they can lay claim to their own piece of bricks and mortar.

The survey, released today by mortgage broker Mortgage Choice, showed 28 per cent of Australians will be 41 years or older when they buy their first home.

Mortgage Choice national manager of corporate affairs Warren O’Rourke said the research provided a fascinating insight into the lives and mindsets of upcoming first homebuyers.

“With housing affordability at a low, we knew it would be intriguing to uncover the demographics and inclinations of today’s Australian first homebuyer to be,” Mr O’Rourke said.

“Some of the results were not anticipated and others serve to strengthen our picture of the typical person or couple and their determination to buy their own piece of this country – the great Australian dream.”

The online survey asked a range of questions of 1003 Australians who planned to purchase within the next five years.

Of those surveyed, 12 per cent intended to buy within the next six months, 25 per cent within 12 months, 34 per cent within two years and 29 per cent within five years.

The greatest concern most respondents had about buying a home was not being able to afford repayments if interest rates were to rise (41 per cent), while the length of time required to pay off a loan (16 per cent), and sacrificing lifestyle to pay off a mortgage (15 per cent) were also high on the list of concerns.

Mortgage Choice said the discovery that 28 per cent of first homebuyers would be 41 years of age or older when they finally bought a home was possibly the most curious of the survey results.

“Granted, 21 per cent will be 26-30 years at time of planned purchase and 19 per cent will be 31-35 years, what we tend to think of as the average first homebuyer age bracket.

“But another 15 per cent will be 36-40 years, 18 per cent will be aged 41-50 years and, astonishing for some, 10 per cent will be over 50 years of age.”

Mortgage Choice said South Australia had the biggest proportion of older potential buyers, with 33 per cent from that state saying they would be over 41 years of age.

“This is perhaps a result of older tree-changers migrating to the city of churches to finally buy a home because property is cheaper on average there than in most other states,” Mortgage Choice said.

“It is a long time to wait to buy your first home, but many people have different priorities in life,” Mr O’Rourke said.

“For some, career, investing in shares, or buying a holiday or living a large part of life without budgeting are more important than owning their own home,” he said.

NSW and South Australia had just under 20 per cent of respondents saying they will be aged over 40 when they buy their first home, while the most prevalent age bracket for home buying for any state was the 26 to 30 years group.