U.K. housing market gloom of eight months ago has gone – or has it?
Eight months ago the outlook for the UK residential property market was pretty gloomy with experts, most notably the then Chancellor George Osborne, warning that prices would fall significantly if the country voted to leave the European Union.
Well, the country did and now at the start of 2017 the headlines could not be more different with prices still rising and the latest house price sentiment index showing that households still believe that values will rise.
Even when we look past the headlines and take into account the regional differences and the fact that many aspiring first-time buyers are not only facing paying more and needing ever higher deposits, the outlook is far from the doom and gloom that surrounded the referendum and its aftermath.
In key cities around the country, prices were up 7.7% year on year with Bristol recording an increase of 9.6% and Manchester 8.9%, while London has very much seen the market slow in terms of prices, sales and rents.
Indeed, the latest monthly survey from the Royal Institute of Chartered Surveyors says that prices continued to rise across the UK apart from London at the end of 2016 while rents are also rising with RICS forecasting a rise of 5% a year over the next five years.
But the headlines also tell us that first time buyers are older and are paying more for their first home. The report from the Halifax also says that the number of first time buyers increased in 2016 for the third year in a row.
But the average
deposit paid has more than doubled in the last decade to reach GBP 32,000 and experts and commenters suggest that it is only low interest rates that are keeping first time buyer numbers so high.
The UK government is doing its bit to help first time buyers with the flagship Helpto-Buy schemes popular and promises of more affordable and starter homes but vision and innovation is what is needed, a bit of thinking outside of the box.
That is why my eye caught an interesting article last week by Carla Sateriale, a market analyst at the Council of Mortgage Lenders looking at a pilot scheme in the United States which helps young buyers move into repossessed homes, particularly recent graduates who have a good job but also burdensome student debt that means affording a deposit and mortgage payments can be hard.
The $10 million SmartBuy programme is being tried out in the state of Maryland where employers in cities have voiced concerns that they cannot attract top graduates because of housing costs.
It allows first time buyers with a deposit of at least 5% to purchase selected properties, often one which has been repossessed by the lender. After living in the property for five years and meeting all repayment obligations, a portion of the borrower’s student loans are wiped out, up to 15% of the property purchase price.
It is too early to say how well the pilot will work but with the UK’s much awaited Housing White Paper due for publication any day now perhaps this is the kind of innovative and radical thinking we need or when interest rates rise first time buyer numbers will fall. This is of concern because sales fell at the end of last year, and they could easily do so throughout 2017 if firsttime buyers continue to face rising house prices.