Future of UK House Prices
Summary
TLDRThis video explores the UK housing market's resilience, with house prices rising 83% over a decade despite economic challenges. It discusses how parental wealth has become a significant factor, with 'Bank of Mom and Dad' contributions increasing to help first-time buyers. Despite high house prices and stagnant wages, the market shows signs of stability, with a 14% increase in housing stock and a 23% rebound in sales in 2024. Experts predict a modest 4% increase in property prices in the coming years, suggesting affordability challenges persist. The video also touches on potential future influences, including interest rates, economic conditions, and demographic changes.
Takeaways
- đ UK house prices have seen a significant rise of 3,000% over the past 50 years, with an 83% increase in the decade following the 2008 credit crunch.
- đ Despite pessimism and stagnant wages, house prices continued to rise, suggesting a resilience in the housing market.
- đ° The 'Bank of Mom and Dad' played a significant role, with parental wealth contributing ÂŁ9.4 billion to help children get on the property ladder in the last year.
- đ London experienced a marginal fall in house prices, while Scotland and Northern Ireland saw the fastest growth, indicating regional disparities.
- đ High house prices and rising interest rates have made affordability a challenge, particularly for first-time buyers.
- đ The increase in house prices outpaced both incomes and rents, leading to financial distress among younger generations.
- đą The UK housing market is heavily wealth-dependent, with 50% of UK wealth tied up in the housing sector, compared to 24% in the US.
- đ There's been a 14% increase in the housing stock for sale in 2024, but demand has increased by 20%, suggesting a rebound in the market.
- đź Experts predict a modest 4% increase in property prices in the coming years, a significant reduction from previous forecasts of a 10% fall.
- đ Geopolitical uncertainty and potential financial market turmoil could impact the housing market, although current economic indicators are more stable.
Q & A
How much did the average house price increase in the UK from 1996 to 2007?
-The average house price in the UK increased by 28% from 1996 to 2007.
What was the percentage increase in UK house prices over the decade following the credit crunch?
-UK house prices rose by 83% over the 10 years following the credit crunch.
By what percentage have UK house prices risen in the past 50 years?
-In the past 50 years, UK house prices have risen by 3,000%.
How did the housing market perform during the high interest rates in 2022 and 2023?
-Despite high interest rates in 2022 and 2023, the housing market experienced a less than expected correction, with average house prices maintaining their value.
What is the role of 'Bank of Mom and Dad' in the recent UK housing market?
-The 'Bank of Mom and Dad' has become a significant player in the UK housing market, with parents providing a record ÂŁ9.4 billion to help their children get on the property ladder, more than double what it was five years ago.
How has the affordability of housing affected first-time buyers in the UK?
-Affordability has genuinely stretched beyond the reach of many first-time buyers, with high deposits and high monthly mortgage repayments making it difficult for them to enter the housing market.
What are the regional differences in house price trends in the UK?
-There is a regional effect in the UK with London experiencing marginally falling prices, while Scotland and Northern Ireland see the fastest house price growth.
What is the forecast for property price increases in the coming years according to the script?
-Experts predict property price increases of around 4% in the coming years, with a real house price increase of around 2% a year.
How has the rise in interest rates affected the UK housing market?
-Higher interest rates have made mortgage repayments more expensive, leading to a twin problem for first-time buyers of very high deposits and high monthly mortgage repayments.
What could be a potential factor limiting future house price booms in the UK?
-Real wage growth has slowed down dramatically in the past 14 years, and if this continues, it will be an important factor in limiting house price growth.
What is the potential impact of the government's plan to build 1.5 million new homes on house prices?
-The government's plan to build 1.5 million new homes could limit price rises, but it is not expected to have a huge effect on the overall house prices.
Outlines
đ UK Housing Market Trends and Challenges
This paragraph discusses the historical growth of UK house prices, noting a 3,000% increase over the past 50 years and a 28% rise even after the 2007 credit crunch. Despite pessimism and stagnant wages, house prices continued to rise, with a significant increase of 83% in the following decade. The affordability issue is highlighted, with first-time buyers facing high deposits and mortgage repayments. The 'bank of mom and dad' is identified as a key factor supporting the market, with parental wealth increasingly aiding children in entering the property market. The regional variation in house price growth is also noted, with London experiencing a slight fall while Scotland and Northern Ireland see the fastest growth. The role of wealth in propping up house prices is emphasized, with wealthy homeowners providing more assistance to their children for deposits.
đ Factors Influencing Future House Price Growth
The second paragraph delves into factors that could influence future house price growth. It mentions the potential for a slowdown in real wage growth to limit house price increases, contrasting the past 14 years of house price boom with the current economic climate. The paragraph also discusses the anomaly of the 1960-2007 period, where real house prices rose significantly, and suggests that such growth is unlikely to continue. The role of inflation and interest rates in affecting affordability and the housing market is explored, with predictions of modest interest rate cuts potentially enabling more people to enter the market. The paragraph also touches on the government's plan to build new homes and its limited impact on prices, as well as the challenges in meeting housing targets. Immigration is noted as a factor with some upward pressure on house prices, but not a fundamental driver. The paragraph concludes with advice for buyers and renters, suggesting that affordability and mortgage repayments should be the primary considerations, rather than speculation about future house price trends.
đ Global Factors and Demographics Impacting the Housing Market
The final paragraph addresses global factors and demographics as they relate to the housing market. It raises the possibility of geopolitical uncertainty and financial market turmoil affecting house prices, drawing parallels to past events like the 2008 financial crisis. The paragraph also discusses the government's plan to build new homes and its potential, albeit limited, impact on prices. Demographic changes, such as migration and population growth, are considered, with a note of skepticism towards predictions of massive population increases. The paragraph highlights the continued demand for housing in areas with high concentrations of jobs, like London. It also mentions the potential for working from home to rebalance housing prices across the country. The video concludes by emphasizing the failure of the current housing market to meet the needs of the younger generation, suggesting that the future of house prices should not be the sole determinant in the decision to buy or rent.
Mindmap
Keywords
đĄHouse Prices
đĄCredit Crunch
đĄInterest Rates
đĄAffordability
đĄWealth Effect
đĄRegional Effect
đĄHousing Affordability
đĄRent
đĄReal Wage Growth
đĄHousing Market Correction
đĄDemographic Factors
Highlights
Between 1996 and 2007, the average UK house price increased by 28%.
Despite pessimism and stagnant wages post-credit crunch, house prices rose by 83% over the next decade.
In the past 50 years, UK house prices have seen a staggering 3,000% increase.
Even with high interest rates in 2022 and 2023, the housing market showed resilience with a minor correction.
The affordability of houses is stretched, yet prices continue to rise, challenging first-time buyers.
The 'Bank of Mom and Dad' contributed a record ÂŁ9.4 billion in 2023, more than doubling in five years.
57% of new property market entrants receive help from parents, highlighting the role of wealth in sustaining house prices.
Rising rents, faster than house prices, are financially distressing for young people, prompting parental assistance.
UK wealth has grown faster than incomes, with 50% of it tied up in the housing sector.
High house price to income ratios are near record levels, indicating a potential overvaluation.
Experts predict a 4% increase in property prices in the coming years, a significant drop from previous predictions.
The potential for a significant house price drop was discussed, with various economic factors suggesting a downturn.
New mortgage lending rules have protected households from the full impact of rising interest rates.
The government's plan to build 1.5 million new homes may slightly curb price rises but is unlikely to significantly alter the market.
Immigration has had a minor upward pressure on house prices, but it is not a fundamental factor.
The future of house prices should not deter individuals from buying if they can afford the mortgage repayments.
The younger generation has been failed by the current housing market, facing significant challenges in affordability.
Transcripts
if you had bought an average house in
1996 11 years later it would have
increased by
28% after the credit crunch there was
widespread pessimism and stagnant wages
but it didn't stop house prices rising
by 83% over the next 10 years in the
past 50 years UK house prices have risen
by
3,000% if you're going on past Trends
British house prices seem like a one-way
bed even when interest rates went
through the roof in 2022 and 23 the
housing correction was less than
expected it seems that average house
prices defied gravity and maintained
their value but given that affordability
is genuinely stretched and beyond the
reach of many firsttime buyers how is it
possible that house prices keep
Rising the recent rise in rates made
mortgage repayments much more expensive
giving firsttime buyers a twin problem
very high deposits and then High monthly
mortgage repayments on top of that kind
of the worst of Both Worlds it was
levels of repayments reminiscent of past
house price crashes yet give or take a
few percent average house prices have
maintained their value now it is true
there's a regional effect with prices in
London marginally fall boring and
Scotland and Northern Ireland seeing the
fastest house price growth and this
reflects how interest rates have a much
bigger effect where house prices are
already
expensive but when explaining recent
house price trends it's important to
look at the role of wealth in propping
up prices in recent years there's been a
significant increase in the amount of
Parental wealth coming onto the market
last year the bank of mom and dad gave a
record 9.4
billion more than double what it was 5
years ago 57% of those entering the
property Market do so with help from
their parents and the interesting thing
is that housing affordability has
worsened and housing has become more
expensive wealthy homeowners have given
more to help their children get a
deposit and get on the property ladder
the bank of mom and dad is really a big
player it's almost like parents think
what do I need to do to help my children
get a
house and it raises a question why are
parents doing so much to help their
children firstly the only thing to rise
faster than house prices in recent years
is rent this is causing a record number
of young people to be financially
distressed or end up having to live with
their parents so maybe some parents
think that a help with a deposit is a
small price to pay to get rid of their
Troublesome children it's not all
altruism but the broken nature of a UK
rented sector is a factor in encouraging
people to try and pay ever higher income
multiples and this is the irony of the
housing market at the moment as
household wealth increases this wealth
is then used to inflate the housing
market in recent years the UK has seen
wealth grow faster than incomes and 50%
of UK wealth is tied up in the household
sector unlike the US where it's just
24% the situation also creates
inequality whether your parents own a
house or not very important for
determining the likelihood you can buy
higher interest rates have led to lower
mortgage lending but they've not
deterred family help and this explains
why house price to income ratios are not
far off record levels they have come
down a little bit but are still very
high by historic
levels however could parents become
reluctant to keep propping up house
prices not everyone can access family
wealth and if you have a median income
student debt and are paying Market rents
it's very hard to save for a deposit and
buy a house also through withdrawal of
help to buy is another Factor reducing
demand
and there are still good metrics which
suggest that house prices are overvalued
at least by long-term trends so there
may not be a dramatic crash in prices
but there are very real constraints to
future house price booms buy to let
investment looks less attractive in an
era of tight regulation and also with a
much less Prospect of capital gains but
perhaps the most important factor is it
real way growth has slowed down
dramatically in the past 14 years and if
this continues as is probably the case
then it'll be an important factor in
limiting house price growth real wages
are actually one of the biggest factors
determining house prices in the long
term also another important thing is
that when we talk about the house price
boom of the past 14 years is also a
little misleading certainly house prices
Rose faster than incomes
2009 but if we take into account
inflation the real value of housing
looks much less impressive real house
prices are actually still lower than
2007 they are around 12% down on
20122 the interesting thing about UK
house prices is that the period 1960 to
207 was an anomaly in terms of very
significant rise in real house prices
and in the future it's very hard to see
any continued increase in real house
prices at least what we saw in the past
few decades even accounting for the role
of wealth 50% of the population at least
still rely on borrowing affordability uh
requirements now in the short term there
is an element of good news for home
buyers inflation has been falling this
year and even stubborn inflation like Co
inflation and services is falling too
and this enables a prospect of some
modest interest rate cuts to come now
the moment predictions are still fairly
limited uh interest rates are estimated
to stabilize around say 4% but even a
modest cut from 5 to 4% would enable a
few more people to come back into the
housing market and so far in 2024 zupa
report a 14% increase in the number of
stock of housing for sale but at the
same time demand has increased by 20%
it's kind of rebounded from the
stagnation we saw last year and so far
2023 has seen a
23% rebound in sales now it's nothing
like a boom more like a welcome break
from the ultr low transactions of last
year but this a sign there a degree of
normaly returning to the
market what what do experts predict for
long-term house price trends the on
predict property price increases of
around 4% in the coming years though
last year they were predicting a 10%
fall which has not yet
materialized sav's forecast that house
prices will rise 28% by
2028 this is a real house price increase
of around 2% a year suggesting no
improvement in affordability if this
prediction proves to be the
case what about the case for a
significant house price Falls last year
there were appeared to be quite a few
good reasons to suggest this could
happen interest rates increased from 0.5
to 5.2 really increasing mortgage costs
at one point with inflation exceeding
expectations mortgage rates Rose to over
6% combined with record housing
unaffordability
the weak economy it all seemed the
perfect recipe for house prices to
fall and also it is worth bearing in
mind that historically when interest
rates go up there tends to be a time lag
of maybe 18 uh 24 months before house
prices start to fall in the '90s prices
fell 2 years after interest rates
started to rise and a similar thing in
2009 now this year still many homeowners
are remortgaging to higher in interest
rates the effective rate on outstanding
mortgages has risen from 2.5 to
3.7% and this will continue to rise as
more homeowners remortgage to higher
rates however given the performance of a
housing market this year combined with
better news on inflation and interest
rates it's hard to see any imminent
crash new mortgage lending rules which
were brought in post for financial
crisis means that fewer households are
exposed by the rising interest rates and
unless there's a big recession with
Rising unemployment we're unlikely to
see the kind of repossession rates we
saw in the early '90s and to a less
extent 2008 for all the weaknesses uh in
the UK economy and there are some still
very real weaknesses unemployment is low
and we've started to see some tentative
signs of real wage
growth a housing crash would really need
some kind of Black Swan event such as an
inflation shock like
2022 or financial Market turmoil like we
saw in 2008 now given the geopolitical
uncertainty this definitely remains a
realistic possibility also the signs the
US economy slowing down and turmoil in
stock markets and financial markets
could spill over into the housing market
like
2008 the Govern planned to build a one
half million new homes in the next 5
years will this alter prices well it
will a little bit but not that much as a
rough rule of firm you increase Supply
1% prices will be 1% lower than
otherwise so if you build 1 and a half
million homes it will limit price Rises
but not a huge effect also I think that
it's worth pointing out that meeting
housing targets will probably prove very
difficult certainly the past record is
pretty poor and house builders are
showing uh lower profit margins and they
claim it's hard to get skilled labor and
build houses in the first place an
interesting development of this year is
that the fastest house price growth has
come in those areas which are least
expensive where there greater
affordability uh prices are rising
faster than Wales Scotland and Northern
Ireland perhaps a continued Trend to
working from home could rebalance uh
prices throughout the country although
to be honest I doubt that
uh 33% of all graduate jobs are still in
London and that's where most of the
demand will continue to be how much is
immigration affecting house prices again
there's some upward pressure from a
rising population but it's not a
fundamental Factor it influences prices
but um not very much now certainly very
high levels of migration in the past two
years have put upward pressure on rents
and this has some spillover effects into
house prices you know recent migrants
are much more likely to be in the
private rented sector they very rarely
buy when they first come here but also
I'm a bit skeptical of the predictions
of massive increases in the population I
made a video on this you can check out
later the UK has falling fertility much
faster than the on admid and in the long
term the population rise maybe less than
the O forecast it's worth bearing in
mind the case of Japan where house
prices are still below their 1980s Peak
at least partly due to demographic
factors should the future of house
prices affect whether I buy or rent well
I think there's a general rule that you
buy a house if you can afford the
mortgage repayments and it makes sense
compared to the alternative and I
wouldn't worry about what may happen to
the trajectory of house prices whether
they go up or go down for investors
buying on an interest only mortgage is
certainly less attractive than it was 10
20 years ago since 2,000 most invested
profit came from capital gains but it's
hard to see any real house price gains
in the coming decade it's always
difficult to predict what's going to
happen to house prices but one thing is
definitely true is that the current
younger generation have really been
failed by the current housing market
this video goes into more detail about
why it's so difficult for so many young
people
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