Looking at what has happened to property prices over the last few years, it produces a very mixed picture, and it is difficult to see how and why the property market would crash. A report from Zoopla argues that this growth may have been over-exaggerated. This is because there has been a key shift over the pandemic, where more houses have been sold than flats, which has changed the ‘mix’ of properties that have been reported on. As houses are typically more expensive than flats, this could have given the impression that prices across the board have risen by more than they have.
What bubble?
Further reports now show that prices in London only rose by 3.9% from 2021 to May this year, after recording falls during the pandemic. In Aberdeen, prices have fallen by 2% over the last 12 months and average values across the city have dropped by around £6,400 over the last two years. A report by the Halifax revealed that first-time buyers saw prices rise by just 3% between 2020 and 2021. Beyond the talk of a bubble bursting, is there enough evidence that there was one in the first place?
However, there are of course key considerations to be made when we forecast what is to come:
Over 50% of people own their homes outright, so mortgage repayments are not a worry. However, buyers could be in danger of overstretching themselves and being forced to sell if the value of their home falls and they feel new pressures from the growing cost of living.
Those that have got on the ladder for the first time since 2014 have been on repayment mortgages rather than ‘interest-only’, so they have been building equity since the start. Buyers are buying properties they can afford and are repaying back mortgages from the day they buy building in an equity ‘cushion’ to protect themselves from being forced to sell.
While Southern areas have seen considerable rates of price growth every year, places in the Northeast have risen by less than 1% year-on-year, it is possible that prices are simply ‘catching up’ with where they should be, which suggests that people can afford to pay the higher house prices we have seen during the pandemic’.
Property prices fluctuate commercially in different areas because the price someone is willing to pay for a property changes depending on the level of competition.
The cost to obtain a mortgage has increased in the last few months and has precluded a cohort of leveraged buyers from joining the market.
Kevin Shaw, Managing Director of National Sales at LRG, summarises: “While the property market across the UK is seeing new levels of demand and sales yields, it is important for us to take a step back and reflect on how things can change in a matter of time and how they sit within a wider context. There are certain things to be keeping a close eye on, particularly how rising bills will affect how people afford their mortgage repayments as this will have a knock-on impact on the properties on the market and demand. For now, we are looking past media storms about bursting bubbles and watching the market closely day-to-day so we can support our customers to navigate circumstances.”
