The UK’s housing market has been in a state of flux for a number of years, with property prices both rising and falling, and a number of groups still facing difficulty in getting on the first rung of the housing ladder.
Now it seems that the UK’s housing market could be tipped for a boom, after figures revealed that house prices have leapt by nearly £10,000 in the last year alone, reflecting the wider recovery in the economy. GDP grew by 0.7% between May and July, according to figures from the National Institute of Economic and Social Research, more than doubling the 0.3% growth in the economy in the first quarter of the year. With experts in the industry arguing that schemes such as Funding for Lending and Help To Buy are behind the rise, and the latter due to be extended in January 2014, it seems that the upward trend in house prices may continue for some time yet. Here are some of the latest developments in the housing market.
House price rises won’t be welcome news for first-time buyers
While current homeowners may welcome the news that house prices are continuing to grow, this may not be welcome news for first-time buyers who have traditionally struggled to gather the finances they need to secure their first home. This view is shared by property economist Matthew Pointon, of Capital Economics. He said: “Evidence that house prices are in the midst of a steady recovery continues to accumulate, which is bad news for first-time buyers.”
Figures also show that the gulf between house prices and income levels is widening, with house prices now equalling 4.62 times the average earnings, compared to 4.34 times average earnings in July.
Rising prices leading to more buyers paying out stamp duty
With the average cost of a home hitting £169,600, it seems that more homes are being pushed over the stamp duty threshold of a property value of up to £125,000.
Research has revealed that quarter of buyers in England and Wales are stumping up £7,500 or more in stamp duty. However, with the average cost of a three-bedroom semi now coming in at £253,000, it seems that families could be worst hit by stamp duty costs. The higher rate of stamp duty of 3% applies to properties in the £250,000 to £500,000 price range. Figures show that 182,692 of the 723,829 homes bought in 2012-13 were subject to a stamp duty rate of 3% or more.
Alexander Gosling, of online estate agents House¬simple.co.uk, argued that action must be taken to address this issue. “An overhaul of the grossly unfair and outdated stamp duty system is urgently needed. The punitive jump in stamp duty from one to three per cent is now hurting the average person.” This view was also shared by Miles Shipside, commercial director at property analysts Rightmove, said: “As well as helping buyers get mortgages through the Help To Buy scheme, the Government could consider a stamp duty overhaul.”
Is Britain headed for a property price bubble?
With house prices rising at their fastest pace for three years, rising by 4.6% between May and July compared to the same period last year, some in the industry have expressed fears that the UK is heading towards a property price bubble. However, this idea has been rejected by Martin Ellis is a housing economist at Halifax. He said: “It is premature to say that we are seeing the formation of a house price bubble. What we are seeing is the impact of improved property market sentiment.
“Confidence has been boosted recently by encouraging signs in the economy, government housing initiatives such as Funding for Lending and Help to Buy, evidence of growth in UK GDP, and a reduction in unemployment.”