[Originally posted at LSE British Politics and Policy blog, 14/08/13]
This week has brought a slew of news about the UK housing market. Industry commentators are telling us the sector has “turned a corner”: levels of market activity increased significantly in July alongside a sharp upturn in prices. Average prices are now near or above those reached prior to the 2007-8 crash, although experience is diverging across the regions.
While some news outlets are reporting these developments in decidedly positive terms, the commentary is more mixed and critical than perhaps the government would like. As prices rise more households are shut out of the home ownership market. This in turn can have negative consequences for private rent levels. For those within reach of home ownership affordability is deteriorating: first time buyers are having to borrow more, when wages are largely stagnant. Loan-to-value ratios are reported to be edging up towards levels that must be deemed unwise. And all this is happening at a time when many existing home owners are only managing to sustain their current commitments because we are experiencing an unprecedented period of very low interest rates. [Read more...]