Newcastle city centre postcode area is cash rich

Apr 23 2008 by David Furniss for The Journal

T HE last few days of conflicting messages about the housing market and the impact on the overall economy has had a measure of good news by way of the Bank of England’s Monetary Policy Committee’s decision to reduce interest rates by 0.25% and the decision to pump more money into the economy.

If lenders allow the reduction to filter through to borrowers than there will be a noticeable sigh of relief. What has been concerning is the recent differing views of where the residential market is heading – some say values down by 20%, others – such as Atisreal in its Housing and the Economy report – are more considered.

While consumers scratch their heads about what all this means one measured fact from the Atisreal report is the Newcastle city centre postcode of NE1 which is cash rich.

For, according to the Land Registry there is a market liquidity of 94%, essentially those buyers who can raise the equity to complete a purchase, against a national average of just 10%. Staggering perhaps, but confirmation that some of us here can be circumspect with cash.

The Atisreal report, published in conjunction with Professor Patrick Minford, who currently teaches economics at Cardiff Business School and who was formerly one of Baroness Thatcher’s economic advisers, urges the Bank of England to take action to ensure that banks have liquidity through lending and, like the Fed, it needs to widen the collateral it will accept to classes of mortgages, other than sub-prime.

Professor Minford says: “By doing this, the risk premium should come down. Furthermore, the Bank of England needs to cut rates directly. Of the two, market rates need to come down to below 5% in the current months in order to stabilise the economy against the credit crisis.”

Returning to the issue of falling property values, The Housing and Economy Report forecasts house prices will start to grow again in 2010, after a 2.1% fall this year and a further 0.5% fall in 2009.

Though 2007 saw prices rise by 8.9%, prices fell towards the year end as a result of the credit crunch and the tightening of mortgage availability.

A combination of developer caution and planning restrictions have maintained tension in the supply chain which suggests the North East may not be subject to the kind of negative market seen elsewhere in the country.

David Furniss is head of Atisreal’s office in Newcastle