Monday, 23 January 2017

Housing in the UK has been turned on its head - its official!

Last week some data came out that showed in certain parts of the country it was cheaper to pay off a repayment mortgage than rent a house!  This was proof, if any was needed that the housing market has gone completely on its head.
What this demonstrates is we have a broken rental model (too expensive) and a broken housing market (a buyers market for the few who can do so).
Bizarrely, there were moves last year with higher stamp duty on investment properties and tax changes that have made buy to let less attractive.  This might have helped make buying cheaper for non-investors, but at the same time it has stemmed the supply of new lettable properties. Hence higher rental prices.
However, although it might now be cheaper in absolute terms to buy, you have to be loaded to get the borrowing.  Lenders are saving the best rates for people with huge deposits and the lack of 100% mortgages and premium rates for small deposits makes borrowing unavailable to some and unaffordable to many.
The 2016 budget has contributed to and arguably caused this strange situation.
But where is the exit door from this problem?
That is very simple.  it is supply side.  there isn't enough.  Unless the UK addresses a supply side problem that has been around for 100 years we won't get out of this mess.  Irrespective of whether buying is cheaper than renting on the market one thing is irrefutable - whichever way it is housing is too expensive.  And until we have more homes built on a big scale that isn't going to change.

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