The lack of recovery in the housing market in the UK is having a knock-on effect on developers and members of the RCIS.

For the 7th consecutive quarter members of the Royal Institute of Chartered Surveyors have seen a decline in their workloads whilst housing developers are reluctant to build new homes that nobody will buy. The Glenigan Index, which measures the value of new private home construction, reports a drop of 20% last year.

According to Steve Turner from the Home Builders Federation, the market needs to make more contractor mortgage funds available to let people purchase residential property. He believes that until this happens, the housing market will remain sluggish.

And it looks like the situation is set to get even worse in 2011 when banks and building societies have to begin repayments on loans they received from the government in 2007 and 2008. This will lead to more stringent credit criteria according to Moodys, the credit-rating agency.

It was hard enough to get a contractor mortgage last year as lender’s approvals dropped by 2.3m to a mere 1.3m. Although lobbyists have been calling on the Bank of England to further delay the repayment timetable, the Bank of England Governor, Mervyn King has confirmed that it will go ahead as scheduled. Banks and Building Societies will then have until April 2014 to repay a total of £319bn borrowed from the government’s emergency state schemes.

Prior to the credit crisis, UK lenders could raise money through the wholesale markets and in the year before the crunch they raised £130bn through those channels. But in the past 2 years they have only been able to raise £11.5bn according to figures from the Council of Mortgage Lenders.

Many Building Societies will be hit hard by this as they have already had their credit ratings cut. In fact, only the Nationwide now has the ability to look to the wholesale markets. Additionally building societies lost deposits of £7.6bn in 2009.

None of this spells good news for anyone hoping to sell their property, or get a foot on the mortgage ladder, over the next few years as economists and credit experts believe house prices will slump and contractor mortgages will be made available.

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Image: Going No Where! by bixentro