The year 2007 seems so very long ago now. It was when the housing market in the UK had hit its peak and before the credit crunch imposed by the global recession took hold. Back then prices could rise week on week and if you weren’t quick you could miss out on a price you could afford. The latest information from the Halifax housing price index shows that there has been another slight improvement in July. Although it reports a modest 0.8% rise in house prices in the UK it has to be welcome news – it’s the first quarterly rise since October 2007. Perhaps it is a sign that we have weathered the worst of the financial storm, though the figure is so small it might only be a seasonal blip coupled with the low interest rates that still prevail that currently make house buying attractive for those with capital and employment. If the next set of quarterly results also shows a rise then maybe there is reason to hope that the trend is moving upwards.
The average house price in the UK [August 2009] is £159,623, still down on the same period last year by 12.1% though it has crept up by small increments for both June and July [£156,442 and £158,871 respectively], which has given the overall quarterly results the positive figure. Observers have commented that the uptake in housing has been due to those buyers in 2008 who were intending to make a purchase but holding off realising that whilst the banking crisis was uppermost in people’s minds. It is not expected to be sustained, as an increase in prices would put house prices out of sync with household earnings, as incomes have been cut for many and unemployment an unfortunately realistic prospect for many more potential buyers.
Since Margaret Thatcher’s Housing Act 1980, Right To Buy, house ownership in the UK has been perceived by many indeed as a right and in the twenty-nine years that has passed many have become used to the idea of property purchase as an investment and an alternative to a pension plan. With house prices having seemed so solid families have been able to leave their children considerable inheritances unseen in the past. These inheritances have allowed the younger beneficiaries to afford deposits or even buy outright the house of their dreams in the knowledge they too can probably make a profit when they downsize or even amass enough capital to be able to upgrade their residence. However, with house prices’ falling the bubble has burst for this particular dream as the spectre of negative equity faces many who bought properties beyond their reach and still face the repayments on them though their saleable value has decreased. Harsh reality is replacing the expectations of annual foreign holidays even with cheap flight airlines, dining out regularly and entertainment outside the home.
The rental market could provide solutions for accommodation and still impact positively on house prices as property owners develop their portfolios for rent rather than sales as long as they are not greedy and can make long term investments.
Steven Mcdouglass is an employee of Which Network – A Mortgage Network consultancy company.