I had to chip ice from my car windscreen this week before driving into the office. Winter has arrived and it’s the season of roadworks around the town. In reflective mood, I got to thinking ‘where does the property market overall stand today as we head towards Christmas?’.
Well the national papers are still happily writing their downbeat commentaries on the British Housing Market. Some talk about property prices, whilst others highlight the problems faced by the younger generation in gaining a foot-hold on the property ladder. Others feature articles about the severe lack of new homes being built (not true in Harrogate – it’s quite the reverse).
To make sense of the property market of today we have to understand our yesterdays. In the early 2000’s, between 1m and 1.3m people moved each year in England and Wales, peaking at 1,349,306 home-moves (house sales) in 2002. However, when the credit crunch hit in 2008 the number of house sales then plunged to 624,994 in 2009.The market has then steadily recovered with 899,708 sales / moves in 2016.This however means there are still around 450,000 fewer house sales /moves each year compared to the early noughties.
The key question is this – why are there fewer house sales on a national basis?
To understand – we need to turn back the clock 50 years.
In the late 1960’s, 70’s and early 80’s inflation was running at high levels. In order to combat this, the governments of the day raised interest rates to increasingly higher levels. Higher interest rates meant the householders monthly mortgage payments were higher, and mortgages took a large proportion of the homeowner’s household budget. This wasn’t however all bad news as inflation tends to erode mortgage debt in terms of real spending power. Consequently, as wages increased to keep up with inflation, this enabled home owners to obtain even bigger mortgages .At the same time their mortgage debt was decreasing and allowing them to move up the property ladder quicker.
Let’s move on now to the late 1990’s and the early noughties, and things have changed. UK interest rates have tumbled as UK inflation declined. Lower interest rates and low inflation, especially in the five years 2000 to 2005, saw double digit growth in the value of UK property. This greatly increased home owner equity and people could continue to move up the property ladder without any financial boosting from inflation.
The snowball effect of larger numbers moving house continued into the mid noughties (2004 to 2007), as Banks and Building Society’s loosened their lending criteria.(most of us will remember the 125% loan to value Northern Rock Mortgages).This enabled home movers to borrow even more money and move further up the property ladder.
It would be logical to think that with the extremely low interest rates of recent years ( only now at 0.5% after being at 0.25% – a 320-year low ), the number of people moving would be booming. This is not the case. Broadly speaking less people nationally are moving because: (1) low wage growth of 1.1% per annum (2) the tighter mortgage rules since 2014 (3) fluctuating property price growth in the last few years and (4) high property values compared to salaries.
It is also the case that there has been an increase in the number of households not moving because there has been a fall in the number of mortgaged owner occupiers. Many of these households are the homes of older generation mortgaged owner occupiers. It’s a truth that older people don’t tend to move as much nowadays , regardless of what is happening in the property market. Those older folk who do move tend to be high equity owner occupiers who previously would have moved with a mortgage but now move as cash buyers (the result ? — higher house price growth).Some mortgaged homeowners are unable to move because of the difficulties in financing a new mortgage and keep within the new rules of mortgage affordability that came into play in 2014 ( before we all start demanding a relaxation in lending criteria for the banks, lets bear in mind that we don’t want to return to free and easy mortgages and a Northern Rock scenario !!!).
In all of this there is Harrogate – the place we call home – the Teflon Town – Capital City of the North and the Golden Triangle – where property prices, rents & demand continue to increase year on year and where the five largest House builders in the UK are hard at work alongside a great many more very good/more local builders and developers.
Will Harrogate property marketplace continue to be buoyant and strong?
Who is to say ? – but as Damon Runyon famously said;
The race may not always be to the swift nor the victory to the strong, but that’s how you bet.
If you wish to discuss the above or are interested in the Property market in Harrogate then please come along and see us and enjoy a free no obligation chat about the services we provide.
