The media coverage of the housing market in the UK has been prominent since the economic crisis began in 2007. The global melt down began with mortgages being given to sub-prime borrowers, and then repackaged and sold as investment grade debt by banks and brokers.
The property market in the UK ground to following the collapse of Lehman’s as banks tightened up their lending requirements and some home-owners were left in negative equity. Fast forward 5 years and there is a resurgence in lending, higher LTVs and the property market, especially in London is back.
This tweet sums up one of the Abshire-Smith Directors recent experience:
There average London property is now estimated at over £500K, which leaves home ownership as a distant dream for young Londoners on middle to low income. House prices are on the up in London, with estate agents stating they have record sign-ups of first time buyers wanting to view properties.
- CML – First time buyers lending at highest level since 2007
- House building developments are lagging demand - City AM
- HMRC revenues buffered by stamp duty
- Rightmove says little sign of UK housing bubble - Reuters
- Bank of England interest rates at record low of 0.5%
The disparity between the increase incomes and house prices is widening. Earnings for most have stagnated, and in real-terms (taking into account inflation) have dropped). The majority of boroughs in London are seeing month-on-month rises, as first-time buyers are looking to leave the rental market.
The governments flagship help to buy scheme, has been criticised by many analysts, as it is thought this will fuel further demand for a market that is already relatively heated. The concern is that the housing market will rally and then prices will fall, leaving borrowers and lenders in the same position as 2008.
The counter argument is that when inflation is considered, the property price rise is relatively muted. When the Bank of England does tighten monetary policy and begin to raise rates, there will be some borrowers who left on a knife edge with the squeezed disposable income.