Market Rally in the Housing Sector?

Share On Facebook
share on Linkedin

If anything single-handedly caused the economic crisis that is now still being witnessed in the world, it would probably be the housing bubble.

Britain, like other countries, has witnessed a terribly downward trend in its housing sector, with many people still in desperate need of a place to call home. Cash or credit availability has become so scarce, as banks don’t seem to be lending money any more.

Under such gruesome conditions, it seems almost inconceivable for investors to ever risk putting their money in any house building company. Yet, in a sudden turn of events, the market has miraculously rallied behind these companies, and people are now wondering if the housing market is completely back on its feet.

While the housing market has experienced some improvements in the past few years, it is however not close to assuming that the market is back to its pre-crash level. House prices are still falling, although not as fast as they were before. And the question this raises is- what has happened that some of us are apparently yet to see?

The truth is housebuilders are making use of every possible strategy to survive the stringent market conditions they have found themselves in. Many of them even took advantage of the last recession to buy up cheap parcels of land that would prove to be highly profitable as the years go by.

Many home builders have also embarked on constructing more houses instead of flats (the demand for flats have slumped since the crisis).

Seeing as demand implies an interest that is backed up by the ability to pay at any particular time, the present market condition cannot be said to demonstrate a sufficientlevel of demand to drive the market, as mortgage lenders are increasingly declining to lend out money for house purchases.

Even the few mortgage institutions that are willing to offer loans often demand for the kind of loan-to-value that would see customers coming up with about 40 percent of the total finance amount on their own. The truth is demand has fallen.

And with demand shrinking, prices are expected to shrink even more in response to the market.Nevertheless, the government and homebuilders are both doing everything possible to prevent that from happening.

With interest rates being pruned down by the government, homebuilders are now directly lending money to people to enable them buy their own houses. Also, nearly a quarter of all new houses in the country are subject to some sort of shared equity arrangement with the builder.

But for how long will this economic ‘magic’, so to speak, go on? Not for long.

CLICK HERE TO REGISTER FOR FREE ON ADVFN, the world's leading stocks and shares information website, provides the private investor with all the latest high-tech trading tools and includes live price data streaming, stock quotes and the option to access 'Level 2' data on all of the world's key exchanges (LSE, NYSE, NASDAQ, Euronext etc).

This area of the site is for independent financial commentary. These blogs are provided by independent authors via a common carrier platform and do not represent the opinions of ADVFN Plc. ADVFN Plc does not monitor, approve, endorse or exert editorial control over these articles and does not therefore accept responsibility for or make any warranties in connection with or recommend that you or any third party rely on such information. The information available at is for your general information and use and is not intended to address your particular requirements. In particular, the information does not constitute any form of advice or recommendation by ADVFN.COM and is not intended to be relied upon by users in making (or refraining from making) any investment decisions. Authors may or may not have positions in stocks that they are discussing but it should be considered very likely that their opinions are aligned with their trading and that they hold positions in companies, forex, commodities and other instruments they discuss.

Leave A Reply

Do you want to write for our Newspaper? Get in touch:

By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions

P: V: D:20220816 01:42:37