Recent reports in the market suggest that property prices have increased by 10% in the past 12 months, this may come as a surprise to many considering the current economic climate.

 

Lenders and still holding back, unemployment is at its highest since 1994 and the country is in record amounts of debt, all the ingredients for a dim outlook on property prices but despite all this property prices continue to rise.

 

There is a severe lack of stock at the moment, as soon as anything decent comes on to the market it’s attracting offers, buyers are finding ways to get the finance together which is remarkable in itself considering the lack of finance available.

Can this continue?

 

It can but maybe we’ve just entered a new kind of property market that’s set to stay for a generation, this maybe what we have to get used to:

 

-          Lack of finance from lenders

-          Low interest rates not reflective of real lending rates

-          Lack of property on the market as people cannot afford to move

-          Increasing prices as the population grows and demand outstrips supply

 

There may now be a small percentage of UK house owners that can afford to move, thus creating a very small market place that is only open to the ones lucky enough to have large deposits or the support of parents.

 

Many people now rent a property rather than risk buying one, with high unemployment and the risk of interest rates going one way only (up) it’s hardly surprising. The average age of a first time buyer will increase each year if lending remains tough.

 

A return to a “normal” market with plenty of finance available and loan to value rates of 95% seem like a very long way from the masses so maybe it really is time to accept that this is the new market for the next generation with only a few of us able to move and ever increasing prices.

 

The only way that prices will really fall is if people start to struggle to pay their monthly mortgages and are forced to sell at below market prices in order to move out quickly but in reality current low interest rates are making it possible for people to ride it out, if interest rates/lending rates do go up significantly then there could be a real change in the market and prices may tumble.

Posted by Graham Lock - 14/05/2010 13:48:37

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