House Price Boom

Journalist: Robert Kellaway, Daily Express

ended 16. March 2022

We have been discussing the state of the UK housing market with a financial strategist who anticipates very strong residential property price growth in the short and medium term particularly in what he calls ‘ordinary housing’ outside London where there are good levels of employment.

Do you agree or disagree with this view and does your current experience of market conditions support it?

13 responses from the Newspage community

"With housing stock at such low levels, it's only natural that prices will continue rising. Unfortunately, there simply aren't enough homes for everyone who wants one. Our population growth combined with an ageing society means this is likely to worsen as fewer new houses are being built now than ever before. Despite the numerous headwinds facing the economy, the lack of supply means it's hard to see prices falling."
"I disagree with the fact there will be strong price growth. Employment is currently strong, but inflation is at its highest rate for 40 years, and people's wallets are getting hammered. Lenders are already starting to factor this new reality into their affordability assessments. But the main issue is rising interest rates. The property price boom of the past decade has been fuelled by incredibly cheap credit. Without it, people simply won't be able to afford to pay so much for property. I think we'll see prices start falling in the second half of 2022."
"While I agree that we will see property price growth in the coming year, the growth will be more modest than we saw in 2021. Rising inflation, energy, fuel and food bills as well as the National Insurance increased and for many, Council Tax hikes, will make mortgage affordability so much tougher. If people can't borrow as much, they can't pay as much for property."
"I do agree with this view. In North Somerset, we are still experiencing a lack of stock and this correlates with buyers leaving the major cities behind and looking for a more rural lifestyle. North Somerset is extremely well connected to major cities, such as Bristol, Cardiff and London (by mainline rail) and this enables buyers to "cash in" on their London sale price and purchase a property giving them much greater value for money. We see multiple offers on "ordinary housing stock" and there are often disapointed buyers, which drives values up. Many buyers are leaving London, renting in the short term and then onward-purchasing later when they are in a strong position to buy. I don't see that changing much as we progress through 2022."
"We are finding that many of our property investor clients are still very bullish on the residential housing market. Many of them are planning to grow their portfolios in 2022, especially around North West England, where prices are more affordable. With property being a well known hedge against inflation, I am expecting continued growth in average house prices throughout 2022."
"Current market conditions back up what is being said as currently there are multiple buyers for every property, especially in economic hotbed towns and cities. With strong employment levels, house prices are holding and in some cases rising. How long this will continue, no one knows, especially with inflation spiralling out of control. But an ageing population and not enough houses currently being built will support prices. Now is time for the government to look at incentives for sellers to free up stock to allow greater mobility within the property ladder."
"The housing market seems to follow different laws of physics to everything else, so those that back against it continuing its extraordinary growth do so at their peril. On the one hand, we have an extraordinary short to medium term situation with runaway inflation and a cost of living crisis being exacerbated by conflict in Europe. This has fed through to higher mortgage rates and will start to affect how much lenders are able to lend as they take into account extra costs. As people's borrowing power diminishes, we should see the pace of house price growth slow across the board. On the other hand, we have record-high employment, wage growth and potential borrowers feeling safer in their jobs than they have for a long time. This positive sentiment on the back of a two-year pandemic, together with interest rates that may be rising but are still historically low, helps to create an almost insatiable demand for property. Add into the mix a shortage of the very product that is being demanded, namely homes, and you have a potent cocktail for further growth. Which force wins out in the end only time will tell, but I would expect house price growth to continue, though not at the eye-watering levels we have seen over the past year."
"I will admit, I'm sceptical. While I agree that levels of employment are good and more homeworking has allowed people to move further afield, helping to boost property values in more remote areas, everything depends on the ability of people to borrow money and that could be the fly in the ointment. Whilst lenders are still keen to lend, with interest rates rising and the cost of living moving ever upwards, this will impact on the size of mortgage borrowers can access, which could limit future house price growth."
"When there seems to be a bidding war on every single new property, prices can only go in one direction and that's up. The latest Rightmove stats show double digit house price growth in the East Midlands and if you think that's bad, spare a thought for renters. Rental property stock is down, demand is up 99% year on year so if you aren't buying, you're in real potential difficulty."
"The price of housing is a combination of three things: the number of houses available to purchase, the number of people wishing to buy a house, and the amount of money they can get their hands on to do so. At the moment all three factors suggest an increase in prices. There aren't that many houses, flats, shoe-boxes (you name it somebody will buy it) available, and we don't build enough new ones each year. There are more people wanting to buy a house than ever before. Partly because there are more people, but also more people are living solo instead of coupling up young like their parents did. Furthermore their parents are more likely to live in separate houses these days due to higher divorce rates. Smaller household sizes means we need more houses. And finally, people are able to borrow more, and seem happy to do so. As they are competing with others who are willing and able to borrow more, prices are forced higher. Recently a lender increased the amount a couple earning £30k a year each to 5.5 times their total income. That's a £330k mortgage."
"As a mortgage broker based in Bristol, we have seen a large number of buyers relocating away from London, which supports the claim that flexible working has reduced the necessity to live near your workplace but could also be fuelled by other factors, such as the shift in buyer preferences. We have seen a large increase in the demand for properties with outdoor living space, most likely a result of the pandemic and the fact many people now spend a lot more time at home."
"We tend to try not to predict the markets, as it's a bit of a fool's game. Looking at the influencing factors, it's not likely that employment levels are going to be the primary catalyst for a short to medium term housing boom. The primary driver here is lack of supply and high demand which is more to do with a growing population and changes in social attitudes towards work and living space. It's hard to say where that will take us as other dampening factors are now in here, namely inflation and higher interest rates, but there certainly aren't enough houses to go around at present."
"Housing stock at low levels and high demand for property equals upward pressure on prices. Even factoring in likely base rate increases, mortgage rates still remain at low levels historically. Rental prices increasing continues to make buying an affordable option but there are various headwinds facing the market in the form of the cost of living crisis, uncertainty around the war in the Ukraine, rising fuel prices and inflation generally."