The UK housing market may be more resilient than most people thought. Amid fears that the market was going down after Brexit, prices are rising at record levels and turning things around, but that doesn’t mean that the market is out of the woods. For many homebuyers, the increased cost highlights a squeeze on living standards.
Trouble for First-Time Buyers
The market is causing problems for first-time homebuyers, especially due to the strongest year-on-year price rises in the market.
That’s combined with an in-demand amount of houses, with 45% of real estate agents’ property now under contract—a frustrating prospect for many potential buyers. Compared to when Brexit referendum passed a year ago, there are more buyers and sellers.
The number of sales in June 2017 was up more than 4% over the same month in 2016, with cumulative sales for the year on pace with what they were in 2016. There are more sales, and houses are selling for more money.
Although the average asking price for first homes dropped 1.7% over the previous month, it is still 3.8% higher than what it was a year ago. For any buyers, this means they can get less house for the money and have to spend more to maintain their living standards.
Although some numbers show the market is improving, in many ways, the property market is actually cooling, which could be a signal that consumer spending is losing momentum.
Among other signals are muted wage growth, tightened consumer credit, and the looming mortgage interest rate increase—the first in more than a decade. Things in the market are definitely changing for better or worse.
According to housing market analyst Miles Shipside, “A year on from the shock referendum result and subsequent dent in activity levels, the fundamentals remain strong.
Low unemployment, low interest rates, strong demand and historic undersupply of homes are mitigating any wobbles in confidence.” This is especially noteworthy because the results come at a time of year that is traditionally fairly quiet in the real estate space with buyers and sellers on vacation.
“The average time to sell, standing at 60 days in this month’s report, has remained broadly unchanged now for the last quarter, and also points to market consistency in most areas that again flies in the face of some who might suggest that the market is in negative territory,” said Brian Murphy, head of lending for Mortgage Advice Bureau.
Warnings from the Housing Market
Although most of the data shows an increase in the market overall, real estate experts are still providing warnings.
The high demand and relatively low supply can stretch buyers and eventually cap prices. While growth has been strong in certain regions, the national average of home price is still “relatively subdued” and house prices in many areas are “virtually at a standstill.”
Growth was strongest in the West Midlands, followed by the East Midlands, Yorkshire, and Humbler. Areas with the weakest growth include greater London, which saw home values drop .5% in May.
Another recent survey, this one from the Royal Institution of Chartered Surveyors, found that the number of properties available per agency has dropped, on average, to an all-time low, showing that supply may be lower than many people think.
Overall, the UK real estate market’s performance is a pleasant surprise to most people, especially considering that it has only been a year since the uncertainty of the Brexit vote.
However, the changing market has put a strain on some buyers and could signal other hiccups in the economy. Although there are some issues that will be faced in the future and nothing is certain, signs point to the market being calm and steady for some time to come.