A few years back it was certainly fashionable to link the mortgage and housing markets of the US and UK, with much rubbing of the hands as we anticipated benefiting from the American boom. We of course did, but with hindsight, this was at least in part as a consequence of a less positive American trend ‘sub-prime’ lending.
As well as the copycat-effect, we actually also saw several North American based lenders enter the market in what turned out to be an ill thought out attempt to export their model.
In my memory, this is the 3rd time this ‘colonisation’ has occurred and therefore its food for thought that perhaps one of the signs of the next downturn will be the reappearance of such lenders on our shores. However, this time may be different – with the global economy shifting east, perhaps we should be looking for more activity from Far East players as a sign of overheating.
For now there is no doubting that a strong correlation with North America remains and so an overview of their market remains of more than passing interest. The summary may sound eerily familiar. CNN recently reported that house buyers are now being priced out of the market in many areas, particularly in the big cities. The national average growth rate sits at 13% per annum- comparable to our own ‘best’ performing region, London.
In some locations, the rises are much higher. For example, Las Vegas has grown by 25% and San Francisco is not far behind at 23%.
The construction rate for new units is accelerating but behind demand, further magnifying price effects. 35%+ of all offers were made as cash purchases in the last year. All this sounds more than a little like some aspects of the UK. At this time, a key difference is that US mortgage rates have risen by 1% in the last year, beginning to put pressure on those who now have to cope with 25% higher payments.
Perhaps as a consequence, repossessions rates grew 7% between Feb to March alone this year and were 47% higher than a year ago. With a UK rate rise now being predicted by many within the next 12 months, perhaps we should be giving more consideration to the US numbers if we want to model our own direction of travel.
Richard Sexton is director of business development at e.surv
