Last week, we published this article, all about lenders’ reluctance to offer 90% mortgages any time soon. One of our readers asked us: “will this result in a decrease in house price growth or even a decline in house prices?” and we thought we’d put it to our expert valuations team to answer.
Here’s what they had to say…
“Well, an accurate answer to this question is difficult as the residential market is multi layered and reacts differently to various locations and price strata’s. Assuming that we are commenting on the ‘average’ UK family home in and or around major city locations such as London there are a number of factors to keep in mind.
Firstly, the UK has constant accommodation requirements due to land scarcity, regardless of the state of the economy. The lower the price range, the more demand surges from lower income users, as rental accommodation requirements and net migration to those areas to seek work increases. The larger the centre, the more insulated the market is to trends.
Secondly, high LTV ratios are a small percentage of overall mortgages and the lending policies such as: property type, aggregate of funds available to residential lending, government policy at the time, the presence or absence of confidence, consumer sentiment and various other factors tend to drive the markets, rather than specific actual alterations in lending policy in a low volume market sector.
Thirdly, there may be some negative impact at the affordable end of the residential market however, if there is a decrease in values in locations where this sector is active, then investors traditionally move in as real returns improve as rental propositions. Right now, with a weak pound there is an increasing level of offshore investment to major sectors such as London in outer concentric ring suburban locales. House values tend to respond to average income levels and costs. So where there has been a maintaining of wages in real terms through the furlough scheme, these have not dropped as a rule.
Right now, the alteration in lenders’ policy against the backdrop of the wider concerns relating to COVID-19 and the upcoming Brexit situation ought to be seen as a bit part player in the suite of issues that the markets are faced with.
As at the date of writing, our property and valuations team are seeing a maintenance of values sub £1M level in central and outer London, however it remains to be seen post-Christmas how the markets fare.”
Hopefully this answers your question and our expert team have given you more of an idea of the current house price market. If you’ve got a question you’d like us to answer, be sure to get in touch.