In the middle of a global, pandemic-fuelled recession the UK housing market somehow found a way to set new records as prices rose quickly off the back of robust and steady demand.
Actually, according to the Financial Times, “While Britain’s economy shrank by a fifth during the second quarter of 2020, house prices were about 1.7 per cent higher than a year before in July, according to the Nationwide Building Society. Official data is not yet out but transactions also appear to be on the rise: a closely watched survey by the Royal Institution of Chartered Surveyors showed new instructions from sellers and inquiries from buyers were up sharply during July.”
It’s something of an anomaly to have such a robust property market in the middle of a recession, but the conclusion must be sought that the unintended consequences of a global lockdown is a drive in demand for property, as people are now having to spend much more time inside.
Prices for property fell roughly 30% during the 2008 financial crisis, so if we’re comparing the two then it strikes as odd that UK property is now setting records for growth. There are probably logical answers to this, but this too could well have unintended consequences outside of capital appreciation.
First Time Buyers
In a report by the BBC, it has been pointed out that with UK banks now under increasing pressure thanks to the current recession, many are now asking for increased deposits on mortgage approvals and this is causing concern amongst First Time Buyers who had been saving with the intention of a 5% or 10% deposit.
Speaking to BBC News NI, Martin Hinch, a research associate with Ulster University, said ““The only logical answer, I would say, if they have tightened up lending criteria, is that it’s probably due to a level of apprehension, possibly due to the lockdown situation and potential future uncertainty.”
Despite the chancellor suspending stamp duty on new house purchases until next year, this will have little effect on the lending criteria being set by most high street lenders who are mostly looking for a minimum of 15% as an up front deposit, but there are also reports that many are also restricting how much family are allowed to help out to gather it together.
This hasn’t been helped by the record increase in house prices as this, in turn, is adding more and more expense on to already stretched saving pots. A house worth £250,000 will require, on average, an extra £500 on a 15% deposit if it’s value increases by just 1%.
With that in mind, it’s useful to advise those who are currently in the market for their first property to seek advice from a mortgage advisor and to also approach an experienced estate agent who can provide guidance and advice.
There is still plenty of choice and there are plenty of options for first time buyers but it’s certainly advisable to seek out guidance now to ensure that there are no surprises down the line.