Property News

Britain is not on the verge of a real estate crash, according to the signs

Opinions differ – and not every prediction is correct. According to some, Britain is going to tumble into a real estate crash. However, others are less pessimistic and look at the positives which will avert this crash. Post pandemic, the real estate market has been at an unexpected high, keeping all those involved, including estate agents in Sittingbourne, really busy.

However, with the hit to the economy caused by inflation, the Russia-Ukraine conflict, and other calamities, it remains to be seen whether or not the bubble will burst. A slowdown is expected, but it is unlikely that a real crash will ensue.

Demand:

The ever-present excess demand over supply is one of the main factors that will keep the real estate market pushing forward. As long as there are not enough properties available and more people who want to buy or rent houses, the demand will be there. The government’s goal for new builds has not yet been met. At present, there is less supply than demand. Though the rush for buyers from the frantic market pace of 2020-2021 has come down a bit, investment in real estate is still popular. Hence, prices and rents will not decrease.

Locations:

The lockdowns and enforced online working led to a major “race for space” in suburban areas where larger accommodation with more outdoor space was available. This trend continues in some areas, where the demand is still high. As such, there is an increase in property prices and rents. With the return to normalcy and resumption of office working, many people have returned to cities and the economic hubs like the South East, which is attractive to working professionals. So these areas too are increasing in popularity, causing an upward trend in the property market.

Government initiatives:

During the pandemic, the reduction in SDLT (stamp duty land tax) was an incentive for many people. It resulted in a rush for investment in property, which caused the housing market to rise to steep heights. Many other offers have also been made to help buyers and sellers so that the real estate market is kept stable.

LISA – Lifetime Individual Savings Account –

this can be used to buy a first home. According to    https://www.gov.uk/lifetime-isa,” The Lifetime ISA limit of £4,000 counts towards your annual ISA limit. This is £20,000 for the 2022 to 2023 tax year.”

The Mortgage Guarantee Scheme offers up to 95{b4bcefc12455df2181e76df39629b451cb667a4cd8c434d49d760e5d97a11e88} LTV mortgages under certain conditions.

Help to Buy Equity Loan:

For first-time buyers of a new-build home, an equity loan towards the cost can be obtained. This scheme is applicable up to the end of October 2022.

Right to Buy:

Applicable to those living in council houses in England and Northern Ireland, the Right to Buy scheme allows purchase at a discount. One advantage is that many mortgage lenders will accept the discount as a deposit against a mortgage if it is needed.

Shared Ownership:

Housing associations, local councils, and other organizations offer shared ownership. The person can buy a share of the home from the landlord (usually the council or association) and pay rent on the remaining share. The bought share, which can be 25{b4bcefc12455df2181e76df39629b451cb667a4cd8c434d49d760e5d97a11e88} to 75{b4bcefc12455df2181e76df39629b451cb667a4cd8c434d49d760e5d97a11e88} of the value of the home, will probably require a mortgage. Then, a reduced rent can be paid on the balance.

Since almost everyone wants to have a home of his/her own, these incentives offer opportunities for dreams to be achieved – and, at the same time, keep the housing market alive!

First-time buyers increase:

In spite of the financial situation and low affordability levels, there has been an increase in first-time buyers. It is not only families seeking homes but also young professionals who are looking at investing in property. With the low LTV mortgage schemes, even though the price of a house may have risen, the amount for the deposit has decreased, making it more affordable. Long-term fixed-rate options make it easier. So do innovative schemes like Deposit Unlock offered by Bellway property developers.

Human nature:

The prices of property have been on the incline for so long now that people tend to believe that it will be the norm and prices will just keep increasing. An expectation of continuing price increases causes an impulsive desire to buy property at the going rate now, to avoid the higher price in future. Insignificant as this may seem, it has a tendency to impact the market.

Job market:

Despite the rise in the cost of living, statistics show that the unemployment rate decreased in the early part of this year and job vacancies have reached a high during the months of April, May and June 2022, much more than the same period in the previous year. https://www.statista.com/statistics/283771/monthly-job-vacancies-in-the-united-kingdom-uk/

Most mortgages are on fixed rates so the LTV ratio on any remortgaging this year will be lower, due to rising house prices. Hence, the rate rise will be slight. With more people being employed and filling the job market, property affordability will also naturally increase.

Rentals:

There has been an increase in rentals from the previous year, and the major demand is from office workers, students, and foreigners. City centers that saw a slide in rentals during the pandemic are now experiencing a bounce back, with the demand for apartments rising. This will also keep the market going.

Conclusion:

Despite the above, the instability of the economy, inflation, rising mortgage rates and possible environmental shocks point to a slowdown in the property market. However, the above signs of demand against supply, prices still on the increase and methods by which people are still able to afford the purchase of a home show that the property market will remain alive. According to a former Chairman of the RICS (Royal Institution of Chartered Surveyors), “The continuing lack of choice, combined with a desire to take advantage of mortgage offers at super-low rates before they expire, have given the market added impetus.” Although there may be a decline, there will not be a crash.

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