Future of UK House Prices

Summary

This 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

• 🏠 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.
• 📈 Despite pessimism and stagnant wages, house prices continued to rise, suggesting a resilience in the housing market.
• 💰 The 'Bank of Mom and Dad' played a significant role, with parental wealth contributing £9.4 billion to help children get on the property ladder in the last year.
• 📉 London experienced a marginal fall in house prices, while Scotland and Northern Ireland saw the fastest growth, indicating regional disparities.
• 💔 High house prices and rising interest rates have made affordability a challenge, particularly for first-time buyers.
• 📚 The increase in house prices outpaced both incomes and rents, leading to financial distress among younger generations.
• 🏢 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.
• 📉 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.
• 🔮 Experts predict a modest 4% increase in property prices in the coming years, a significant reduction from previous forecasts of a 10% fall.
• 🌐 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 £9.4 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

00:00

🏠 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.

05:01

📉 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.

10:02

🌐 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.

Keywords

💡House Prices

House prices refer to the cost of purchasing a residential property. In the video, it is discussed that UK house prices have risen significantly over the past 50 years, with a 3,000% increase. The script also mentions that despite economic challenges like the credit crunch and high interest rates, house prices have continued to rise, indicating their resilience and the complexity of the housing market.

💡Credit Crunch

The credit crunch refers to a period of reduced availability of credit, typically caused by a sudden tightening of the money supply and a lack of confidence in the economy. The script notes that even after the credit crunch, house prices did not stagnate but instead rose by 83% over the next decade, showcasing the enduring appeal of property investment despite financial turmoil.

💡Interest Rates

Interest rates are the cost of borrowing money, which significantly impacts mortgage payments for homebuyers. The video script discusses how interest rates went 'through the roof' in 2022 and 2023, leading to a housing correction that was less severe than expected. High interest rates make mortgages more expensive, which can affect affordability and the overall housing market dynamics.

💡Affordability

Affordability in the context of the video refers to the financial capability of potential homebuyers to purchase a house. The script highlights that affordability has become stretched, making it difficult for first-time buyers to enter the market due to high deposits and monthly mortgage repayments, which is a critical issue in the housing market.

💡Wealth Effect

The wealth effect describes how perceived changes in personal wealth affect economic behavior, often leading to increased spending. In the video, it is mentioned that parental wealth has played a significant role in supporting children to enter the property market, with 'the bank of mom and dad' providing substantial financial assistance, which has helped to prop up house prices.

💡Regional Effect

The regional effect refers to the variation in economic or market conditions across different geographical areas. The script points out that house prices in London have marginally fallen, while Scotland and Northern Ireland have seen the fastest growth, indicating that local economic conditions and housing demand can significantly influence house price trends.

💡Housing Affordability

Housing affordability is the extent to which people can afford to buy or rent housing in a given market. The video discusses how housing affordability has worsened, with the cost of housing becoming more expensive relative to incomes, which is a significant concern for potential homebuyers and policymakers.

💡Rent

Rent in the video is discussed as an alternative to owning a home and is noted to have risen faster than house prices in recent years. High rents are causing financial distress among young people, which may prompt some parents to assist with home purchases to alleviate this burden, thus influencing the housing market.

💡Real Wage Growth

Real wage growth refers to the increase in wages after accounting for inflation. The script suggests that real wage growth has slowed down, which can limit house price growth since wages are a significant factor in determining what people can afford to pay for housing.

💡Housing Market Correction

A housing market correction is a period of decline in house prices after a prolonged period of growth. The video mentions that despite expectations, the housing correction was less than anticipated, indicating the resilience of house prices even in the face of economic headwinds.

💡Demographic Factors

Demographic factors are population statistics that affect the economy, including age, distribution, and migration. The video script briefly touches on how demographic changes, such as falling fertility rates, can influence the housing market, potentially leading to a slowdown in house price growth, as seen in the case of Japan.

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 £9.4 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