Let me remind you that credit is the lifeblood of business, the lifeblood of prices and jobs. Herbert Hoover.
The problem with this whole credit-crunch market deterioration thing is that how bad it is really depends on to whom you speak.
A news alert landed in my inbox yesterday which said that pent-up demand from potential house purchasers who can’t or aren’t buying means that there could be an upturn in house prices and it could be sharp.
That was about three days after another alert which said there are currently an average of 15 houses for sale for every 1 buyer. I have to say that seems more likely, looking at the ratio of For Sale and Sold notices around. The house opposite me, for example, has been on the market for over a year: three times the Sold subject to contracts sign has gone up, three times it has come down again. They’re tearing their hair out. First it was that someone further up the chain couldn’t get a mortgage approved, then there was a problem with a survey somewhere else in the chain and somewhere along the line there was a bit of ‘gazundering’ (where the buyer drops their offer just days, sometimes even hours before contracts are due to be signed).
Had all those transactions gone through when they were supposed to, there would have been some nice little earners for local builders and, of course, their merchant suppliers because the level of property transactions is directly related to the level of RMI work in some form or other.
It’s vital that we get things moving to ensure that there is sufficient RMI work around to make up for some of the shortfall from new housebuilding which is around 60% down year on year. I know not every merchants deals with housebuilders and that many of them are still seeing a lot of RMI work coming through. But I’m mindful of the figures from last week’s CPA reforecast – private housing RMI work static this year and 4% down next year – and also of the need to keep a healthy supplier base. A manufacturer whose brick sales are 25% down, for example, because he’s not selling any to housebuilders becomes a weak link in the supply chain. And that’s not good.
I know a lot of the problems were triggered by people borrowing more money than they could pay back and the banks falling over themselves to lend and that now those banks say they haven’t the money to lend to anyone who isn’t an absolute sure-fire dead cert in terms of credit rating. I also know that not 18 months ago the UK High Street banks reported combined profits of some £37bn.
What I don’t know is what the answer to the credit crunch/housing crisis is. I don’t think anyone knows, least of all the banks and the government. That’s the problem. Maybe we just have to hope that that supposed pent up demand comes good.