What Next For The UK Housing Market?

Martin Ellis, Chief Housing Economist at Halifax is recently quoted as saying:
“Economic growth, higher employment, increasing real earnings growth and very low mortgage rates, are all supporting housing demand, with signs of a recent modest pick-up in demand.”

However, we would add that stock of property for sale on agents’ books remains low. It’s now evidently at the lowest since records began in 1978, says RICS and this is seen as a significant factor keeping house prices up whilst buying is being appropriately constrained by tight mortgage lending criteria. Statistics show the number of homes sold even increased by 1% to 98,540 in May, as more cash buyers were coming into the market.

On the other side of the coin, there are fears in some quarters that some of the tax changes in the recent budget could drive some wealthy foreigner investors away from the property market for some while, but we may not necessarily consider this to be a bad thing in itself.

House builders constructing properties for the buy-to-let market were beginning to feel increasingly confident about their earnings prospects up until the recent budget with approximately 15% of new mortgage offers being provided for buy-to-let property purchases. Now though, the restrictions on tax relief for these is expected to hail a reduction in the building of houses for the rental market. Such a reduction wouldn’t help the continuing shortage on the supply-side of the equation, especially as not enough of them are coming onto the open lettings market.

Overall this indicates that the UK housing market as a whole is very far from stable since these things, and several other key factors, continue to wreak havoc for anyone trying to guess the way things will pan-out over next few months and years.

One of the key issues, which the housing market could help the national economy with, is assisting in increasing the productivity of the British worker.

In America, the output per worker is about 30% higher than it is in the UK. In part, this is down to the fact that most US workers live much closer to their places of work than those in the UK. If reasonably priced housing was more available closer to people’s places of work, a significant increase in productivity per worker could be achieved. In other words, less commuting would mean more productivity.
(Statistics obtained via Sajid Javid MP, Secretary of State for Business, Innovation and Skills.)

Posted by: Peter Hendry, Consultant in Housing Valuation at Property Match (UK).

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