“A real life Theatre of the Absurd” was how one mortgage broker described the current state of the property market this week. At the same time, a colleague in the house hunting sector described the pace of the market during Spring as “off the chart.”
Both property professionals were speaking after revelations from the government’s Office of National Statistics – which measures data on actual properties sold – that property in England has increased by 10.2% year-on-year.
With the average property now £275,000, the market has seen the highest increase since August 2007. That was just before the start of the last recession. In terms of property prices, the other nations of the UK are following suit, with Wales looking at 11% increases, Scotland 10.6% and Northern Ireland 6%.
Detached properties the big winners in price rises
In keeping with the desire for more space and gardens following recent lockdowns, detached properties are faring best, having jumped by 11.7%. Flats, on the other hand, had a more modest rise of just 5%.
Last week Rightmove’s Housing Index (which measures property asking prices) showed the average London apartment or house had increased by just 0.2%. And yet buyers are still paying £20,000 more there per average property than last year.
Jonathan Hopper, CEO of Garrington Property Finders pointed out that the economy has shrunk by 6.1% year-on-year during the first quarter – in huge contrast to the 10.2% house price rise over the same period. He blamed Brexit, the pandemic and the stamp duty holiday for creating a perfect storm.
“Spring is traditionally a busy time for the property industry,” he said. “But this year has been off the chart.”
Economy is red, yet property market is green
Andrew Montlake, of independent mortgage broker, Coreco, agreed: “The economy is deeper in the red than ever before and yet house prices are rising at an astronomical rate. It’s a real-life Theatre of the Absurd.”
Despite their comments on the ridiculousness of the property market, neither see it settling down for some time.
Sarah Coles, of Hargreaves Lansdown, agreed. But she did add a cautionary note of her own. The last recession was sparked by irresponsible mortgage lending, she said, whereas the 1990 crash was down to high interest rates and unemployment.
Furlough extension and vaccinations prove property saviours
This time round it was unemployment and the possibility of the furlough scheme ending before the economy was back up and running. But the furlough extension, economy re-opening and a successful vaccination programme has significantly cut that risk.
“The jury is out over though as to whether we’re going to get a similar blow to buyer confidence in the near future,” she added “… much depends on whether the Indian variant sets the economy back again this summer.”
Perhaps the surprising news concerning the super-paced UK property market is that the UK is not alone. House prices across the 37 advanced economies in the OECD grew faster in the first quarter of 2021 since back in 1990. In Australia they were the highest since the turn of the Millennium and American property growth was in double digits.
And as for the future?
Most economists point to incomes being pretty constant – stable enough for people to feel good about going out and buying property. There was a restriction on what we could spent money on too so people have built up savings.
Interest rates have also remained low, causing many in the industry to speculate that the property market can look forward to healthy growth until at least the end of the summer.