A report was released last week that claimed the housing market will be very different in the next few years. Of course, this isn’t news to any of us, but the newest prediction is that the average home would rise from just under £285,000 in 2015 to almost £560,000 by 2030.
Could this be true?
It should be noted that a huge chunk of this forecast simply relies on the compounding portion of the housing market. To fulfil it, house prices would need to rise by 4.6 per cent each year.
It might seem crazy to think about, but it’s truly not that farfetched – it is below the long-term growth of home prices in the UK. A recent report done by Paul Cheshire, is suggesting below long-term trend nominal growth in house prices, but a substantial rise all the same.
Paul points to the housing market and claims: “Demand for housing rises as the economy does better or when borrowing is cheaper and falls when the opposite is the case. But since the number of houses we build hardly changes, these fluctuations in demand are expressed mainly as price changes.” He also goes on to say,
“As all the professionals who operate in the housing market know: this is the housing market cycle. How much prices will rise by 2020 or 2030 is, therefore, going to be influenced very strongly by where in the cycle we are today.” Read more on this here.
Homes have only ever been pricier compared to wages than they are now at the peak of the 2000s boom. Most people just can’t afford a home of their own, simple as that.The only thing putting these people within reach of their home is big parental deposits, and ultra-cheap mortgages.
It’s inevitable that buy-to-let demand will be struck by tax grabs. The Bank of England is watching the housing market and is considering it a potential threat to the economy. It’s also been said that stricter mortgage lending is now hard-wired in.
It was also mentioned in the guardian, that Buy-to-let-landlords are the ones who have benefited most.
For example, in 1996, Dagmar Noble’s building took away her two-bedroom house in Oxfordshire. At that time, it was sold for £55,000 which is £12,000 less than when her and her husband bought in 1989. Dagmar has been renting ever since, and prefers it that way. She’s very content renting a one-bedroom flat in Weston-super-Mare for £420 a month. Today, the house she lost is worth £200,000. Wow!
Dagmar explains why her and her husband weren’t able to meet their payments. “We fell into mortgage arrears because we were in and out of jobs, and our commuting costs were high when we did find work. It was a stressful lifestyle and our marriage broke down.” It was almost a relief when they lost the home, as it was finally away out and to take away the burden.
The only thing we know for sure here is change is inevitable. The housing market will go up and down just like it always has. Hold onto your hats, because it’s going to be a bumpy ride!