Whatever the government press release farms (newspapers) might be saying, those who have tried to refinance with poor credit will know that the economic crisis is alive and well currently. The news from the UK is frankly shocking at the moment, and any suggestion of a house price recovery should be taken with a very large pinch of salt.

Issues surrounding poor credit refinancing abound, and this is a selection of recent “news” reports suggesting the UK’s problems are  a long way from over. The banks and mortgage companies (with the possible exception of HSBC) are still in dire straights and the likelihood of finding financing slim to none.

The ex-Midland bank headquarters in the City of London have just been repossessed and placed up for sale after the owner defaulted on his payments. James Bond building for sale

The UK economy shrank by 2.4 per cent in the first quarter at the fastest rate in more than 50 years and far worse than expected, according to official figures today. The Times

At the same time, the Telegraph - not known for their accuracy are claiming, “UK house prices rise for second month,” despite the fact that they actually fell, according to the land registry figures. Still, a headline is a headline I suppose. The Telegraph.

A wander through the other articles on the same page are full of negative headlines such as : “profits slump as consumers stop spending,” “FTSE100 goes into deep freeze,” “Bankers warn of long road to UK financial system,” and “UK economy shrinks most since 1958,” so I would be taking this “rise in UK house prices,” for what it really is - a miniscule rise in the median value of mortgages written by the Nationwide Building Society in June.

Asking prices for houses in the UK dropped in June, after rising consecutively in the preceding four months, a report from the property website Rightmove showed Monday. With sales volumes considerably off compared to last year, it would appear sellers are finally coming to terms with the realities of the market. The average asking price of property slipped 0.4% month-on-month in June, after rising 2.4% in May. The average asking prices declined to £226,436 from £227,441 in the preceding month. Despite the fall in June, the asking prices have increased 6% since January, Rightmove said.

Year-on-year, house prices slipped 5.5% in June from a 6.2% drop in May.

“The hesitation in asking prices after four consecutive monthly rises appears to highlight that, while new stock remains in short supply, new sellers are having to vary their prices to match local buyer demand,” Rightmove said.

“It’s a mistake to confuse the upturn in enquiries and sales with a return to a more normal market. While conditions are much improved on the darkest days of last year, we are now starting to see some big distortions and wild swings due to the combined effects of recession and restricted mortgage availability,” Miles Shipside, the commercial director of Rightmove noted. The property website pointed out that as the best deals on properties and mortgages were available only for the equity-rich, there was a need to match new stocks which dealers were planning to attract with want buyers want to buy and can afford.

The report said due to limited funds available, rationing of mortgages by raising interest rates and requiring large deposits is likely, as the demand rises with the increase in number of sales.

“Property deals appear within the grasp of cash strapped first time buyers, but every rise in fixed rates frustratingly nudges them a bit further out of reach. Lenders need to be wary not to choke off the recovery in affordability and activity by punishing the returning buyers with ever widening margins,” the report said.

Moreover, Rightmove indicated that unless the markets for wholesale mortgage funding reopen, volumes would remain low due to a distorted reliance on equity-rich buyers.

Meanwhile, the latest report from Halifax showed that median house prices were up 2.6% month-on-month in May, while the Nationwide Building Society reported a 1.2% increase in median house prices for the month. As usual, this clashes badly with the average sales prices which have consistently fallen as asking prices were rising. While the average asking price is £226,436, the average selling price is £152,898, according to the Land Registry - 16.2% down annually.

The Lanzarote property and tourist markets continue to suffer as a result of falling visitor numbers.  As the Spanish airport authority AENA has just released their latest arrival figures for May.  Which reveal that the number of foreign tourists enjoying a holiday on the Island of Fire fell by over 26% last month, versus the same period in 2008.  A sharp decline with serious implications for the many overseas owners of Lanzarote villas and apartments.

According to the latest AENA figures arrivals fell last month from 121,113 visitors in May 2008 to just 89,446 tourists.  A decline of 26.15%.  Whilst the island has now welcomed 118,287 fewer tourists for the year to date than during the first five months of last year.  A hefty drop of 16.91% from 669,451 arrivals to 581,614.

The British market is amongst the worst hit.  Thanks to the damaging double impact of the confidence sapping effects of the credit crunch and the weak state of sterling against the euro.  Which has resulted in many British consumers opting for either a stay-cation in the UK or a holiday outside the euro zone this year.  With the AENA figures revealing that total visitor numbers from the UK have now fallen by 18.76% so far this year versus the same period in 2008. 

All other key national markets are also performing weakly.  With tourism from Germany – Lanzarote´s second largest source of visitor numbers – down by 12.73%.  And from Eire, the islands third largest market – dropping by 14.51%.
With similar falls recorded across the Scandinavian countries, Holland and Belgium too.

Lanzarote is heavily dependent on tourism and overseas visitors and investors have traditionally fuelled the Lanzarote property market.  Which is driven by the island’s all year round holiday industry and a normally buoyant holiday rentals market.

Currently however property transactions on the island have slowed to a snails pace – despite the fact that prices on Lanzarote have been falling since the start of the year.  With many local estate agents blaming the reluctance of local banks to lend to overseas buyers as a key factor in this ongoing decline.

Falling tourist numbers are also impacting upon other related sectors of the island economy.  With ASOLAN, the local hoteliers association, reporting a record low in occupancy figures in Lanzarote hotels last month.  Down to just 49.1%.  The lowest figure ever recorded in over forty years of island tourism.

Investment in property construction in Europe collapsed in the first quarter of 2009, declining 74% from the same period last year.. Construction investment came to 11.4 billion euros compared with 43.3 billion euros in the same quarter of last year, said a report issued by Cushman and Wakefield.

Foreign investment in property construction was also down sharply in the first quarter, when it accounted for just 29% of the total monies invested in Europe - compared to 43% percent in first quarter 0f 2008.

Commercial property rents declined in nearly every European country. In the year to end of March, prime rents fell 3.6 percent, the first annual drop in the sector since 2003. The CB Richard Ellis office rent index for the EU-15 area fell by 3.4% in the quarter, taking the year-on-year rate of growth to minus 4.1%. Twenty eight of the 48 locations in the survey saw prime rent falls, one location increased and 19 remained unchanged. The largest falls occurred in Kyiv (down 33% to €357 per sq m per annum) and Moscow (down 20% to €918 per sq m per annum). The only increase was in Zagreb, where rents increased by 0.8% to €211 per sq m per annum.