The property market is a ladder. If first time buyers cannot get onto the first rung, those above them cannot sell their houses to them and, themselves, move up to bigger houses and so on and so forth.
And why are there so few first-time buyers? Well, it’s a combination of lenders caution in choosing suitable borrowers and the fact that first-time buyers have not saved the rather hefty deposits (on average 21% of the price) now required.
And why should first-time buyers have saved? After all, for many, many years, no deposit was required, at all. So it is not their fault but just a ghastly fact of current life.
Having said that, one positive aspect about living in the Far North is that first-time buyer homes can be exceedingly cheap, and thus affordable, by UK standards, particularly now. Even so, few are buying due to the deposit problem.
It always makes me cringe when I hear politicians harping on about how banks should lend more. Such rhetoric is, essentially, hypocritical. At the same time that they are making these comments, the banking authorities are leaning on the banks to put away more and more money into their reserves. Banks cannot put money away for a rainy day and lend it at the same time. I suppose there will be some MPs who are ignorant of this reality but there is no excuse for that now.
And there is good reason for the banks to save. When the euro crashes (and my opinion is that it is when, rather than if) the banks will need every bit of their reserves to survive the losses that they are going to make from their lending to Eurozone countries that go bankrupt.
We had an upwards blip in interest and sales in the spring and my heart did jump, thinking that the market was picking up. Unfortunately, that activity just faded away. Since then sales, in Caithness and Sutherland, have limped along at a very low level.
And, sadly, with this low level of activity comes another upsetting feature. Lower prices.
It is quite clear that prices are falling. When you are sitting with a relatively high percentage mortgage and you need to buy another house, reducing your price is not a luxury that you can probably afford and it is a wonder to you that others can do so.
Part of the property market, however, consists of sellers who are not so price sensitive, such as the Executors of the estates of those who have died and lenders who have called up their mortgage. They are, relatively, happy to accept lower prices. The few buyers that are out there are looking for bargains and it is these sellers who are selling to them and, thus, influencing prices.
The Halifax calculate that in Scotland, since 2008, prices have dropped by 16%. My personal opinion is that Caithness and Sutherland have suffered worse price falls than the national average.
So what of 2012?
Awful to say but, in my view, more of the same. There are no hopeful signs on the horizon that I can detect. There are, however, many threats and the Eurozone failure is the greatest one of all. When it goes, prices will dip even further and loans will become even scarcer.
So, what is my advice for sellers? Unless you have to, don’t sell. Even if you are in negative equity, providing that you can continue to pay the mortgage, you have a roof over your head. If you have to sell, keep your price keen. Lenders are getting used to the idea that houses sell below the amount they have lent and, in my experience, they are willing to transform the shortfall into a personal loan. In certain circumstances, a buyer, any buyer, is better than no buyer at all!