According to James Briggs, head of personal finance intermediary sales at financial services platform Together, there’s a noticeable rise in tenants expressing interest in purchasing their rental properties from landlords. The recent house price data, as reported by Nationwide, might be contributing to this trend, as it indicates a 3.8% average decline in UK house prices over the past year—the steepest drop since July 2009, with only a slight difference from last month’s 3.5% fall. As a result, typical home prices have now decreased by 4.5% from their peak in August 2022.
Briggs states that despite the recent decline in house prices, concerns about a housing market crash persist, although it remains improbable. Borrowers still face significant challenges related to affordability. Interestingly, there is a growing trend among renters who are keen to buy properties directly from their landlords, aiming to fulfill their dreams of homeownership.
Furthermore, existing buy-to-let investors are carefully assessing mortgage costs in comparison to achievable and sustainable rental income. As fixed-rate deals for these landlords approach expiration over the next year, it’s possible that some investors may decide to release these properties to the market, providing more opportunities for aspiring homeowners.
Regarding the matter, Karen Noye, a mortgage expert at financial advisory service Quilter, reaffirms that affordability continues to be a crucial concern.
According to her, the residential transaction data for June shows a continued decline compared to the previous year. While there was a slight improvement of 6.0% in seasonally adjusted data compared to May, overall transactions were down by 15% compared to June 2022.
This persistent decline reflects the growing strain on affordability, which is significantly impacting the property market in real-time. Aspiring first-time buyers may, however, hold out hope for further price reductions that could make homeownership more attainable.
The severity of the affordability crisis is highlighted by recent ONS statistics, indicating that homeownership in England is becoming a luxury accessible mostly to the top 10% of income earners, who could purchase an average-priced house with less than five years of income based on an average annual disposable household income of £33,000.
“This results in a substantial affordability ratio of 8.4 years of income.
Conversely, in Wales, Scotland, and Northern Ireland, the top 30 and 40 per cent of income earners respectively, can afford an average home within the same timeframe. This disparity highlights a growing wealth gap, making homeownership increasingly unattainable for many in England.
Looking ahead, affordability pressures may drive a downturn in house prices, as suggested by recent indices indicating a flattening or decline in prices. However, achieving significant improvements in these concerning affordability ratios would require either a significant price drop or a substantial wage surge, both of which appear unlikely.
As a result, the construction of new homes to address the supply-demand imbalance and support first-time buyers could become a key point of contention in next year’s election.”
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