The swift rise in London/UK housing prices over the last few years has made the property market more inaccessible to young people, who are now desperate to save for a deposit before it is too late. Prices have risen at an average of 10% each year since 2008 and are now almost 45% higher than their pre-bubble value.
Homeownership is not the only thing that has suffered as a result of this steady increase in prices; Estate Agents have also been badly affected. The average sales price rose from £154,821 at the start of 2007 to £278,399 by 2011 – an increase of 95%, and far outstripping inflation which increased 28% over the same period.
Property sales that take six months or longer to complete have become commonplace, and the average time it takes for a property to sell is now at an all-time high of 12 weeks (up from 9 in 2007), during which time sellers are still responsible for their properties. Sales must be handled very carefully in order to avoid potentially costly mistakes, which are likely to have a negative effect on the speed of sale, and ultimately the price it will achieve. Agents are also at risk from other problems, such as the possibility of illegal subletting which has become increasingly popular with desperate renters out-priced by inflated prices.
The rise in property prices has also caused problems for Buyers who struggle to afford the rapid increases. Figures show that homes are selling for more than 10% above their asking price, which is well above the average of 3-5%, indicating that competition is fierce. As well as this, mortgage lenders are now demanding larger deposits from buyers to cover increased lending risk and inflated prices, so many Buyers are forced to look further afield for their dream home.
As well as struggling to buy, Buyers have also been held back by the increase in Stamp Duty Land Tax (SDLT) which increased from an average of 1.6% before March 2012 to 3% today – a rise of 83%. This is especially problematic for first-time buyers who now have to find an average of £1,540 on top of the price of their new home, which has shot up by more than this in some areas.
As a result, the market is suffering from a lack of activity, with figures showing that the number of homeowners looking to sell or buy has fallen significantly since 2007. The average number of buyers per agent also shows a decline, down from 98 in 2007 to just 83 in 2012. This indicates that fewer people are trying to get on the property ladder than before, which will inevitably be a result of the market’s reluctance to drop prices in line with inflation, and increasingly stringent lending criteria.
However, it is important to remember that homeownership is still very much achievable for those who are determined to get on the property ladder; but this will increasingly mean looking further out of London or outside the UK. Whilst this presents its own difficulties, these options may prove more flexible for Buyers than the overheated London/UK housing market.
If you need help finding a house then speak to an estate agent such as the ones at Estate Evesham, they can help you to work out a budget and show you what is available in that range.