As a home becomes unaffordable one lender has taken a bold stand. The average house in England is now 8.7 times the average annual income, according to data from the Office for National Statistics. So is this sustainable and should policy makers act?
Why Are Home Prices Rising?
Home prices have risen sharply since the end of the first foreclosure as people hunt for homes with lots of space, spurred by the public holidays. Prices have continued to rise since the tax hike ended in September last year.
Marc von Grundherr, director of estate agent Benham and Reeves said: “Getting up the ladder is a very difficult task in today’s market, where only those who have the financial security of the existing property can freely discuss the purchase price”.
Many commentators believe that many people take long-term loans as a lifestyle option, rather than a long-term strategy before buying their home.
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Leeds Building Society is taking bold action to stop lending for second home buyers
Leeds, one of Britain’s 20 biggest lenders has shocked mortgage lenders by announcing it will no longer offer new loans on second homes. With debts of $19.7 billion currently available, Leeds are making history to avoid a total ban.
Leeds chief executive Richard Fearon said the housebuilders did not think that helping people buy second homes was in line with their vision of enabling home ownership. He added that second homes reduce the amount of land available at a time when there is insufficient supply to meet demand.
Other high street names such as Barclays, Halifax, HSBC, NatWest, Nationwide, Santander, TSB and Virgin Money, are all happy to lend some property. It will be interesting to see if other major lenders follow Leeds’ lead, and if they can make a big decision for the builders. It’s hard to believe that landlords selling long-term rental properties will be targeted amid what is being described as a housing crisis. The goal of renters and Government policy should be to reduce the number of holiday homes that are not occupied or offered on the Air BnB channel.
The second domestic problem
There has been a dispute against around 495,000 UK landlords recently. This has put the spotlight on places like Cornwall, where land is becoming unaffordable for local people. This is the result of second home buyers with deep pockets paying high prices for a summer home near the lake.
Councils are being given more powers to ban second home ownership as a way to protect residents. In legislation being discussed in parliament, councils will soon have the power to raise council tax on properties that are used for less than 70 days a year.
Fewer people are buying, but prices remain high
The number of events in 2021 was the highest since before the recession. However, he began to slow down this summer. Last month the sponsors reported that the sales they had agreed to have started to decline.
Earlier this summer, 21% of home sellers said they expected to sell fewer homes within a year, in a recent survey 36% thought they would.
Can’t afford it?
Costs of living are rising rapidly, economic growth is slowing at a snail’s pace and interest rates are rising. It’s easy to see why the housing market is booming. Economists also agree that the government should implement the Belt and Road Initiative as soon as possible. This can delay the sale of a home significantly.
However, even with these many factors, housing prices continue to rise. Right now, there is a housing shortage and more people wanting to become homeowners. Even so, prices will continue to rise.
Realtors are reporting an all-time low in homes for sale. New homes are not going on the market either way.
Tom Bill, Knight Frank’s head of UK housing research, said supply has remained low because “people have taken their summer holidays for the first time in two years. The autumn will provide an acid test for the property market, and we expect annual rates to slow down ‘ono to single digits as demand grows”. If this is true, Autumn will tell us what the future of the housing market holds.