We are all feeling the effects of the credit crunch; as a country in the midst of an economic crisis, every industry across the spectrum has been hit in one way or another, being forced to make cutbacks in order to compensate the shortfalls in preparation for a recession.
One of the many industries which are always hit hard during these bleak financial times is the construction and manufacturing industry. Construction of new homes has virtually dried up due to the depression in the housing market, the demand for property across the board reducing, leaving many new homes left standing empty and a severe loss of revenue for the construction industry. To compensate many large property developers are now offering huge discounts to property investors who can purchase 5 or more new homes in order to claw back some of their losses before the crunch really takes its toll.
The credit crunch has caused mayhem; the reduction in the value of all homes over the past 12 months has been unprecedented, people wishing to borrow money to buy property have been declined, due to new financial criteria required and mortgage lenders reluctant to lend any money to even financially sound investors.
There have also been hidden shocks for many people who purchased new homes in a stable economic climate; those who opted for fixed rate mortgages in the past 5 years are now seeing their fixed term coming to an end, this has resulted in many people either not meeting the criteria to remortgage or not being able to afford the higher rate of interest against their decreased property price, therefore leaving many in the position of either having to sell up and move into rented accommodation or risk losing their homes to repossession. In addition many people, who happily relished the fact that they still had equity in their new homes not six months ago, have slowly followed the downward trend into negative equity due to the decrease in house value.
There are some however, who had a window of opportunity to get on the property ladder in the first few months of the recession. Whilst most of us started watching our house prices plummet, first time buyers started rubbing their hands in glee. Not only were they able to meet criteria to be accepted for mortgages they also found the reduction in house prices meant the amount of deposit required also dropped. They were also able to go for new homes which were starting to reduce in price as the construction industry tried to beat the credit crunch.
The real hidden danger for first time buyers in this situation was to question their job security, as we have already established all industries have been hit hard so anyone’s job security suddenly became questionable, and failure to meet mortgage payments means a real risk of losing your home.
The worst news I’m afraid is yet to come, we are according to government officials only just officially in a recession, and this news comes at the end of yet another record breaking slump in the housing market. Having already established that many contractors are now going bust due to losses in money being tied up in dormant property and thousands of jobs lost in construction already, it is purely a case of wait until the end of a recession.
Anna Stenning takes a glimpse into the dire state of the housing market. The negative effect it has for the construction industry, having new homes lying dormant.
[tags]New Homes[/tags]
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