10.2% house price growth in the year to March 2021 might have seemed unbelievable this time last year. However, the rise and rise of house prices over the last year is hardly news any longer.
The causes have been discussed enough: the temporary SDLT reduction; low interest rates; lockdown-led upsizing/space-hunting and a flight to safer investments driving demand, set against constrained supply.
The effects are also clear: with wages rising significantly more slowly than house prices, affordability constraints are increasingly.
This is creating, and will continue to drive huge inequalities between older and younger generations, and growing demand from both younger and older renters who are ‘priced out’.
What investors and homebuyers alike all want to know is, ‘what next?’ Many fear a housing market ‘bust’ following the boom we have seen over the last year. However, unlike the rapid rises and falls of cryptocurrencies (an indirect comparable, but one that is relevant as an alternative use of capital, and particularly interesting at the moment), housing holds a fundamental value, since we all need a roof over our heads. It is also getting more expensive to build. With construction costs rising due to raw material costs, and regulations around building standards getting tighter, it is easy to see how house price rises will continue over the coming years, in particular for new homes. The UK housing market story of the future is no longer dominated by the high value of land, but by the challenges and costs of building new homes that meet the needs of a net carbon zero economy, in a context of rapidly rising costs to deliver.
Please click on the following links to read the full articles:
The Guardian: https://www.theguardian.com/business/live/2021/may/19/uk-inflation-rises-april-energy-fuel-clothing-bitcoin-ftse-stock-markets-business-live?page=with:block-60a4d4a18f086f71052bafac#block-60a4d4a18f086f71052bafac