Leading article: A housing market that still languishes in economic gloom

First-time buyers are effectively blocked from the property ladder in the South-east

Share
Related Topics

Many will be surprised to learn that over the past six months it has been cheaper and easier to get a mortgage, especially for first-time buyers. Snap them up now, experts say, because they will vanish if the eurozone collapses. But the truth is that any such increases have been marginal to the bigger story about the state of the British housing market.

As are reports that "housing affordability" has improved. A home is deemed affordable when it costs less than four times average yearly earnings. At the peak of the housing boom in 2007 just 5 per cent of properties met that criterion; today 44 per cent of local authority districts in the UK contain "affordable" homes, the highest proportion for eight years.

Let not this seasonal joy be unconfined. The grim reality is that – however competitive mortgage deals may be, and however "affordable" houses may be – people are not buying them. That is particularly true of first-time buyers whose enthusiasm has long been an index of the health and strength of our housing market. Indeed, their number has plummeted to the lowest since records began in 1974. A big problem is the size of deposit they are now expected to produce. The typical figure has soared from 10 per cent of the purchase price in 2007 to 20 per cent today. The average figure is now nearly £30,000, rising to £60,192 in Greater London. The odd 90 or 95 per cent mortgage deal is not much compensation for that.

And yet even large deposits are not the main problem. Economic uncertainty, rather than mortgage availability, has been the greatest constraint, industry experts say. Very few houses are being bought and sold. And most of those are the result of sales forced through job moves, deaths or someone's inability to keep up with the repayments.

Many would-be sellers are staying out of the market until it returns to what they regard as "normal". But this could well turn out to be a form of denial as to the true value of their properties. A crash in prices is unlikely, because demand exceeds supply; new house building is now far behind the rate at which new households are being formed. But it is highly unlikely that prices will return to the days when the only direction was up. The price boom of 2002-7 was an aberration brought on by excessive, and often imprudent, lending by banks and building societies. A return to those ways is unlikely, nor would it be welcome.

There are a few new phenomena. The North-South gap is widening, with many properties in the Midlands and the North within the reach of buyers with a mortgage of £80,000-£95,000. But first-time buyers are effectively blocked from the property ladder all across the South-east. In London – unlike the rest of the UK where the average house fell £2,664 in value last year – prices are slowly rising, as international investment inflates the prices of £5m-plus houses, which pushes prices up across the capital.

A rich-poor gap is emerging, with children of wealthy parents largely the only ones taking the first step onto the property ladder. Buy-to-let mortgages are on the rise again as investors seek to take advantage of rising rents. And a class of "mortgage prisoners" is emerging in poorer areas where home-owners withdrew large chunks of equity from their properties when they re-mortgaged pre-2007. But by and large the housing market is just bumping along the bottom. The traditional Christmas slowdown could well continue throughout 2012.

React Now

Latest stories from i100
iJobs Job Widget
iJobs General

Recruitment Genius: Operations Manager

£30000 - £35000 per annum: Recruitment Genius: An exciting opportunity to join...

Recruitment Genius: Recruitment Consultant

£30000 - £35000 per annum: Recruitment Genius: We have an excellent role for a...

Recruitment Genius: IT Support Analyst - Bristol

Negotiable: Recruitment Genius: An IT Support Analyst is required to join the ...

Austen Lloyd: Senior Private Client Solicitor

Excellent Salary: Austen Lloyd: SURREY - An outstanding high level opportunity...

Day In a Page

Read Next
Should parents be allowed to take pictures at nativity plays?  

Ghosts of Christmas past: What effect could posting pictures of nativity plays have on the next generation?

Ellen E Jones
The first Christmas card: in 1843 the inventor Sir Henry Cole commissioned the artist John Callcott Horsley to draw a card for him to send to family and friends  

Hold your temperance: New life for the first Christmas card

Simmy Richman
The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there
The 12 ways of Christmas: Spare a thought for those who will be working to keep others safe during the festive season

The 12 ways of Christmas

We speak to a dozen people who will be working to keep others safe, happy and healthy over the holidays
Birdwatching men have a lot in common with their feathered friends, new study shows

The male exhibits strange behaviour

A new study shows that birdwatching men have a lot in common with their feathered friends...
Diaries of Evelyn Waugh, Virginia Woolf and Noël Coward reveal how they coped with the December blues

Famous diaries: Christmas week in history

Noël Coward parties into the night, Alan Clark bemoans the cost of servants, Evelyn Waugh ponders his drinking…
From noble to narky, the fall of the open letter

From noble to narky, the fall of the open letter

The great tradition of St Paul and Zola reached its nadir with a hungry worker's rant to Russell Brand, says DJ Taylor
A Christmas ghost story by Alison Moore: A prodigal daughter has a breakthrough

A Christmas ghost story by Alison Moore

The story was published earlier this month in 'Poor Souls' Light: Seven Curious Tales'
Marian Keyes: The author on her pre-approved Christmas, true love's parking implications and living in the moment

Marian Keyes

The author on her pre-approved Christmas, true love's parking implications and living in the moment
Bill Granger recipes: Our chef creates an Italian-inspired fish feast for Christmas Eve

Bill Granger's Christmas Eve fish feast

Bill's Italian friends introduced him to the Roman Catholic custom of a lavish fish supper on Christmas Eve. Here, he gives the tradition his own spin…
Liverpool vs Arsenal: Brendan Rodgers is fighting for his reputation

Rodgers fights for his reputation

Liverpool manager tries to stay on his feet despite waves of criticism
Amir Khan: 'The Taliban can threaten me but I must speak out... innocent kids, killed over nothing. It’s sick in the mind'

Amir Khan attacks the Taliban

'They can threaten me but I must speak out... innocent kids, killed over nothing. It’s sick in the mind'
Michael Calvin: Sepp Blatter is my man of the year in sport. Bring on 2015, quick

Michael Calvin's Last Word

Sepp Blatter is my man of the year in sport. Bring on 2015, quick