This morning the housing market is digesting news from Royal Bank of Scotland that it will make available £1.7 billion of of new mortgage borrowing in Scotland with products including offers up to 90 per cent loan to value.
It comes hard on the heels of news that the Scottish government plans to invest £644m in homes for rent or low cost ownership over the next twelve months.
These developments could not have come soon enough.Just nine homes were sold per UK surveyor in the three months, the lowest since the Royal Institution of Chartered Surveyors' (Rics) survey began in 1978, while house builders warned that construction may hit an 88 year low.
Homes for Scotland says 26,000 jobs have already been lost and much new development across the country is now effectively on hold. Scottish new build housing output has plummeted. And says National Housing Federation director Ruth Davison, "After years of boom
, the housebuilding industry is lurching towards bust".
Potential buyers have been hamstrung by the demands for high deposits by cautious banks. But the news from RBS may be the first straw in the wind that the mortgage freeze might start to thaw this autumn. This will take a year to 18 months to show through in a stabilisation of prices - indeed the house price to income ratio needs to fall further yet to return to its long term average.
But the lending commitment may be matched by other banks - and feed through to customer confidence. At present, estate agents are reporting a notable pick-up in interest among potential buyers - but sales are not showing an equivalent pick-up due to a combination of rock bottom confidence, concerns over unemployment and survey-related costs for existing home owners of putting their own homes on the market.
RBS says it will continue to develop its range of mortgage products including offers up to 90 per cent loan to value. The availability of such deals in the current market is particularly important for first time buyers, who often have smaller deposits.
The Secretary of State for Scotland Jim Murphy said yesterday, "RBS lending will make a real difference to the mortgage market in Scotland and the £1.7 billion package is a direct result of the bank having access to the Asset Protection Scheme. That's good news for the homeowner, the economy and the housing market and I warmly welcome the steps RBS have taken. It follows the bank's earlier announcement of lending to SMEs and the fact lending is moving again is a real cause for optimism."
SAVILLS REPORTS £7.7 MILLION LOSS
Today brought grim news from upmarket estate agents Savills, prominent in the Scottish country house and farm estate market. It reports a loss of £7.7m for 2008 after the sector saw an "unprecedented" downturn. The firm warned that 2009 would be another challenging year with the lack of mortgages continuing to hit sales.
The loss was due to a £45.4m impairment charge related to the effects of the global financial crisis. However, Savills said that the fall in property values, coupled with the weak pound, could make UK property attractive to overseas investors.Stripping out the impairment charge, Savills made an underlying profit of £33.2m last year. In 2007, the company made a profit of £85.9m.
