Sharp rise predicted in house prices bring benefits and drawbacks
20 September 2011
A recent report released by the National Housing Federation shows that there are mixed fortunes for those in the housing market, with predictions that house prices are set to rise sharply over the next few years. The report, prepared by Oxford Economics, will be welcome news for homeowners looking to cash in or downsize, or cash-rich buyers who are likely to be in the minority. In contrast, the findings will bring gloom for those looking to enter the housing market for the first time.
Whilst the report appears to focus on the market south of the border, it is likely that the situation will be very similar here in Scotland. With borrowers only able to access around 2.8 times their income compared to over 3 times at the height of the property boom, and high deposits required by mortgage lenders, it is increasingly difficult to get on the housing ladder. Whilst some lenders are beginning to lend up to 90% of the value of a house, it is predicted that in the medium term, the average borrower will be able to obtain 65% of the value of the property – leaving a sizeable deposit to be found.
House building has also slowed, although the report predicts a slow rise to just below the rate before the property crash. Specifically, the government has scrapped the target to build 3 million new homes before 2020, although the report noted this figure was always optimistic. Consequently, the number of owner-occupiers is predicted to fall and those looking to rent will rise with the problem exacerbated by rising rental prices, although the situation could vary greatly from region to region.
It is clear that for those already established as homeowners, with small or no mortgages, any increase is good news. Those with aspirations to buy have perhaps known for some time that they will have to wait far longer and save much harder to be able to get onto the ladder. It may be that there are a generation who will have to wait until their late thirty’s and beyond before getting the keys to their own home.