Some will see 10.9% annual growth in the year to May as a boom, to be followed shortly by a bust.
However, what tends to happen in the housing market is different from what happens with other purchases and investments. The consequences are also different, and significant politically, economically and socially.
Thanks to Evening Standard, This is Money, The Independent, The Mirror, Property and Financial Reporter for publishing my comments on the latest house price data released. Links to the articles are below.
In other sectors, low consumer confidence tends to reduce consumer spending, and low investor confidence tends to cause emotional selling. Things are different in the housing market because homes are ‘essential’. We all need a roof over our head. So, people tend not to sell unless they really need to. And, with interest rates low, it can be cheaper to pay a mortgage on an equivalent property than to pay rent, once you have put down a deposit. So a mass sell-off seems unlikely – in the absence of significant interest rate rises.
A big cause of current house price growth is the desire for more space – and for those not moving, home renovations are on the up. This is symbolic of our rising living standards – a good thing. It is also causing inflation in the construction sector, which has profound social consequences.
Inflation means the cost of renting, buying and improving homes are likely to continue to rise. This will continue to create widening inequalities between the ‘haves’ and the ‘have-nots’. In short, it is bad news for younger and less well-off people as it will disproportionately, but not exclusively affect them.
https://www.mirror.co.uk/money/race-space-house-prices-soar-24225989
