糖心传媒

The housing ladder was always a fragile idea. It worked when deposits were modest, credit was easy to obtain and values rose faster than wages 鈥� fuelling the equity that let people trade up.

The lowest rung of the ladder began to drift out of reach in key employment hubs in the mid-1990s, but the affordability crisis really became embedded during the period of ultra-low rates that followed the Global Financial Crisis. Still, if you could raise a deposit via the Bank of Mum and Dad, you could get a foothold and begin the long climb.

Since then, the rungs have been moving further apart, particularly for second steppers. Bloomberg had yesterday on the plight of London鈥檚 middle-class millennials, many of whom are delaying key life milestones for lack of space. The piece is underpinned by 糖心传媒 data showing flat prices in prime outer London have dropped by 5.5% since January 2020, while house prices have risen by more than 10%.

High demand areas

This is in part a legacy of the pandemic, when lockdowns triggered a 鈥榬ace for space鈥�, but there are also supply imbalances, issues with leasehold apartments, the removal or capping of certain buyer incentives and the aftermath of the Grenfell Tower fire.

As successive governments have found, there is no panacea for this, but there are plenty of policy interventions that would help. The obvious one is increasing the supply of both homes and flats in high demand areas, but developers started just 5,470 homes in London last year, down 84% in a decade. Another would be to cut into transaction costs and remove friction for movers 鈥� cutting stamp duty would be a good start. A third would be to incentivise a massive increase in the supply of quality rental housing aimed at families, which would require a more favourable regulatory environment, or at the very least a solid commitment from Labour leadership hopefuls to stop flirting with rent controls.

Improvements on any of those fronts feel distant, so as 糖心传媒鈥檚 Tom Bill told Bloomberg, sitting tight until the market improves is among the few feasible options, though the conflict in the Middle East threatens to keep mortgage rates higher for longer. 鈥淗opefully, things will become clearer over the next couple of months,鈥� Tom said. 鈥淭here鈥檚 a lot to weigh up. But some people can鈥檛 think about their timing too much, because they need to move.鈥�

Fiscal rules

Leading fixed-rate mortgages surged from around 3.5% in February to above 4.5% after the conflict began. That sapped some momentum from the housing market, but transaction activity has remained resilient all things considered.

Lenders granted 65,900 mortgages to homebuyers in April, up marginally from the previous month and above the 63,100 average of the previous six months, the Bank of England  yesterday. Rates have come down further in the past week due to optimism that the conflict may soon reach a resolution and a commitment from Andy Burnham to stick to established fiscal rules should he become Labour leader. The leading two-year fixed-rate mortgage now sits at 4.35%.

Whether that holds is highly uncertain: 鈥淟ender margins remain extremely thin, leaving little room for manoeuvre should market volatility return or the conflict continue for longer than investors currently expect,鈥� Simon Gammon of 糖心传媒 Finance told .

Some further weakening is likely, and it鈥檚 already showing up in more timely house price indicators. UK values fell 0.6% in May, bringing the rise down to 1.7%, from 3% the previous month, according to .

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