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A Housing Market UK of Two Halves

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Recent activity in the housing market UK has taken everyone by surprise. With over £37 billion of agreed sales a month has led to headlines of a ‘mini-boom’.

Despite the UK entering recession, there has been a frenzy not seen since the early noughties.

But this is a housing market UK of two halves, lets take a look.

House Prices

Nationwide reported a 2% rise in house prices in August alone! This is the highest monthly rise in 16 years with prices up 5% on an annual basis.

These are pretty shocking numbers, but of course totally unsustainable.

The stamp duty holiday has added plenty of momentum to peoples moving plans. It resulted in people bringing plans forward from next year at the same time as encouraging speed and decisiveness.

Wealthier sectors of society, who are less affected by affordability constraints or concerns relating to job security, are by far and away the most active movers.

Delayed Deals

Such extreme levels of activity have also produced mass frustration.

The capacity of estate agents, surveyors, mortgage brokers, underwriters, lenders, and solicitors has been stretched to beyond breaking point. Especially when some of these firms are operating with reduced staff numbers who are working from home.

It stands to reason the longer it takes for a survey, or a mortgage offer – the greater the chance of a deal-breaking down or a chain collapsing. Frustrations among buyers and sellers are running hot.

And in the middle of all of this – we have the Cladding Scandal. This has effectively removed an entire section of the flat market from being bought, sold or even remortgaged.

Reduced Mortgage Availability

Banks are anxious some sectors of the market have decoupled from economic reality, and are stripping back their mortgage deals day-by-day. It’s perfectly understandable they don’t wish to lend in situations where they feel the risk is too great.

On the flip side, we have our Prime Minister saying he recognises young people have been massively affected and has started talking up the concept of long-term fixed-rate mortgages.

The idea is to bring the 5% deposit back into play and provide state-backed mortgages of up to 95% of a property’s value. This would clearly require significant expansion in the role of the state.

Market Opinion

My personal feeling is that without simultaneous and large scale planning reform – this would merely prop up house prices.

And while that might seem a good idea in theory, there have to be concerns about whether or not it’s a good idea for us as tax payers to effectively be lending money in situations where banks themselves feel the risk is to great?!

Is there such a thing as “reverse sub-prime” lending? What would happen? Will the banks bale out the government this time? I think not.

Whatever does happen in the months ahead, one of the legacies of the pandemic appears to be a substantial re-evaluation of lifestyle, work and property requirements.

My team and I will be keeping a close on things – why not subscribe to get my emails – let’s stay in touch.

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Last Updated: December 20th, 2022