Houses prices increase yet most of the country is still below 2007/8 peak

At the weekend I took a few years off my life and spend a day with long-time friends reflecting on the past, the present and the future. It is strange to believe that a group of 31 year olds have had such mixed fortune in the housing market, despite living within the same three mile radius. Though what stuck out most for me were the grandparents paying £65 per month rent for a two bedroom.
Is renting the future (at those prices hell yes!)? I have often wondered while frequenting Switzerland, Germany and France about the idea of solely renting, but then how would I ever retire, how do they retire abroad? But from discussing with locals it is simple – there system works, rents are better compared to salaries and other benefits provide for a comfortable retirement.

Now next year there’s an election. The “Mansion Tax” has provided me a few chuckles – can’t ever see it coming to fruition and if it does I may be departing the country. Now it’s the Conservatives turn, the talk around a “Rent to Buy” scheme to help affluent young workers. On paper – 20% reduction in market rates for seven years and first refusal to buy. It works doesn’t it? Well sort of, these young workers earn £33,000 each so it is helping but it’s selective helping. Feel sorry for the poor sole earning £34,000.

So it’s a start but there has to be radical reform and initiatives to reshape the housing marking and I cannot understand timidity of politicians of all persuasions in tackling the problem. It is obvious that supply has to be increased dramatically and if we can bail out banks with QE why not something similar to finance housing. The added benefit is the spur to growth and employment that it would provide.

We are now seven years on from the last peak in house prices, annual price inflation is once again approaching 10%. London is the driving force but the focus should be on the 72% of the 3,000 postcode areas which are still below their peak levels. So what is driving house price growth – well the most obvious is investor demand (both internationally and local) which is predominantly hitting London but spreading. The second driver is affluent people who have access to finance, want to upgrade and simply can in this market. Does this all point towards a house bubble – well no, think about – new mortgage checks, more cautious bankers and I would also say still a buyers’ market are all helping keep it at bay. But let’s all keep an eye out to make sure I’m right!

Feel free to contact me 0113 288 2276 or lee.a.wilkinson@uk.pwc.com if you wish to discuss this blog or anything relevant to property and construction.

Enjoy the weekend,

Lee

Follow me on Twitter
Connect with me on LinkedIn