Economist explains why the UK's housing market as we know it is over

#housingmarket #uknews #economy

Fears are growing that Britain’s housing market will crash. With the Bank of England’s base rate expected to hit 6 per cent by the end of this year, there is good reason to feel concerned. Mortgage costs are soaring and fewer people are able to buy homes at all.

What’s certain is that there will be a fall in house prices, but by how much? How will these rising interest rates and mortgage repayments change Britain's housing market for good?

i Housing Correspondent Vicky Spratt speaks to Senior Economist Rachelle Earwaker from the Joseph Rowntree Foundation to understand just how much rising housing costs are likely to have an impact.

Shot by: Sebastian Piette-Pereira
Music: Alex_Kizenkov from Pixabay

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[alexsteven.m]

We Are in Unchartered Financial Waters! every day we encounter challenges that have become the new standard. Although we previously perceived it as a crisis, we now acknowledge it as the new normal and must adapt accordingly. Given the current economic difficulties that the country is experiencing how can we enhance our earnings during this period of adjustment? I cannot let my $680, 000 savings vanish after putting in so much effort to accumulate them.

[austinbar]

Back in the day, when I purchased my first home to live-in; that was in the early 1990s, first mortgages with rates of 10% to 14% and 5% to 6% were typical. People will have to accept the possibility that we won't ever return to 3%. If sellers must sell, home prices will have to decline, and lower evaluations will follow. Pretty sure I'm not alone in my chain of thoughts.

[edward.abraham]

From my analysis, people overpaid for homes even while loan rates were low, I believe there will be a housing catastrophe because these people are in debt. If housing costs continue to drop and, for whatever reason, they can no longer afford the property and it goes into foreclosure, they have no equity since, even if they try to sell, they will not make any money. I believe that many individuals will experience this, especially given the impending mass layoffs and rapidly rising living expenses.

[DorathyJoy]

The fact that there is already an excessive amount of demand awaiting its absorption, despite how everyone is frightened and calling the crash, is another reason why it is less likely to occur that way. 2008 saw no one, at least not the broad public, making this forecast, as I'll explain below. The ownership rate was noted to have peaked in 2004 in the other comment. Having previously peaked in the second quarter of 2020, we are currently at the median level. Between 2008 and 2012, it dropped by 3%, and by the second quarter of 2020, it had dropped from 68 to 65.

[gingerkilkus]

Mortgage rates are currently at an all time high since 2000(23 years) and based on statistics on inflation, we might see that number skyrocket further, a 30-year fixed rate was only 5% this time last year, so do I just keep waiting for a housing crash before buying or redirect my focus to the equity market

[tonysilke]

I've been watching the housing market closely, Prices have been skyrocketing for years. It's going to be tough for first-time buyers to enter the market." how can one diversify $280k reserve .

[Taneehl]

We need to ensure that houses are homes first and foremost - not purely investment opportunities

[scottarmstrong]

Inflation hits people a lot harder than a crashing stock or housing market as it directly affects people's cost of living that people immediately feel the impact of. It's not surprising negative market sentiment is so high now. We really need help to survive in this Economy.

[Jessicatorres_]

Managing money is different from accumulating wealth, and the lack of investment education in schools may explain why people struggle to maintain their financial gains. The examples you provided are relevant, and I personally benefited from the market crisis, as I embrace challenging times while others tend to avoid them. Well, at least my advisor does too, jokingly.

[Raymondjohn]

It is difficult to make exact projections for the housing market as it is still unclear how quickly or to what degree the Federal Reserve will reduce inflation and borrowing costs without having a substantial negative impact on demand from consumers for anything from houses to cars.

[TarrelScot]

One of the hidden penalties of spiralling house prices is the opportunity-cost for other investments. People who are putting their capital into an asset "as safe as houses" are not putting that capital into investment in businesses that are providing jobs and growing the economy.

[edwardt]

I've been hearing that UK house prices have 'never been this high' for the past 25 years, yet they've kept going up. Given the strong culture of home ownership and the mindset that one needs to do whatever they can to own a home in the UK, coupled with successive governments' propensity to shore up the housing market with schemes like Help to Buy, it would take an external shock that the govt does not have pocketbook to combat to bring house prices down meaningfully.

[Henry-Ludlow]

Greed absolutely destroys everything! In the 1950’s a 3-bed semi was 2.7 times the average annual salary, today’s it’s more than 8. A reasonably nice car was 2.4 times your monthly salary, whereas today it’s more than a years worth.

A man could afford to support his wife, send 2 children to university, drive a nice car, and live a happy, healthy and prosperous life…. and all on a single salary income.

Greed destroys! The richest 1% have taken so much from us; they won’t be happy until they’ve acquired everything and we own the square root of zero. 😡

[franknash]

As a young person I bought a house when interest rates were 7.25%. In those days you could only borrow up to 3 times single income or 2.5 times joint income. Had those .conditions remained house prices would not have risen to their present level. Interest rates rose to 15% during the term of my mortgage leading to widespread default. Low interest rates are a comparatively recent occurrence and coupled with more flexible lending have driven up house prices.

[morenahlatshwaya]

Successful people don't become that way overnight. most people see at a glance-wealth, a great career, purpose-is the result of hard work and hustle over time. I pray that anyone who reads this will be successful in life too 🙏🙏🙏

[TheDysartes]

I remember my parents going through several issues in the last housing crash, and nearly loosing their home. So I've always been careful around the mortgage, when I bought we were offered 4 times both mine and my wife's annual wage. We decided to buy using one wage, so that we wouldn't be over stretched if ever the market changed for the worse. We had managed to save a big deposit, and so now due to value increasing we can weather any storm in the next few years. The problem is a lot people stretched themselves too far, when rates were practically zero. A price crash is coming, the old saying what goes up must come down, prices have risen for so long that the bubble is close to going pop.

[audiodead]

The housing market as we know it isn't really over. The 'economist' didn't really say anything that wasn't completely obvious.

[davidgray]

I was in the property business for years and have seen several down turns including the 90’s when over about 7 years prices dropped about 40% as interest rates soared. But what underpins the market today is the huge shortage of supply, and that is the really important factor in this down turn. As a result prices will drop but they won’t drop as they did in the in the 90s. How far they drop is of course unknown. Even to economists!

[tombart]

Mis economist is forgetting one important aspect in this situation: inflation, the house prices did’t go up, the value of the pound was eroded when we printed billions of pounds during covid. Astonishing that economists don’t understand how economy works

[jonnyblamey]

I’ve have been hoping for a housing crash for decades but it never seems to happen. The whole system is stacked heavily in favour of landlords and both parties keeping tweaking it further. Housing is an essential commodity so it is insane and immoral to keep promoting rising house prices and rising rents.