// UK housing market
UK housing market
The UK housing market is continuing to recover, with strength being seen across all regions. Housing activity levels are increasing, with 2015 transactions totalling 1.23 million, flat on the prior year (source: HM Revenue & Customs).
The supply of new housing decreased slightly in 2016 but remained the second highest new home registrations since 2007 (2016 - 152k, 2015 - 156k). (Source: National House Builders Council (NHBC)). New housing starts remain c. 40,000 lower than the pre-downturn peak and significantly lower than that required to meet the demand from new household creation. The Department for Communities and Local Government (DCLG) estimates that 221,000 homes need to be created per annum until 2021 to meet the demand from new household creation in England.
(1) Data source: NHBC
In April 2013 the Government introduced the Help to Buy scheme to improve the supply of mortgage finance, in particular to first time buyers. There are two parts to the scheme: Help to Buy (Equity Loan), providing an equity loan of 20% for new homes in England, and Help to Buy (Mortgage Guarantee), which can be used on all home purchases. Help to Buy (Equity Loan) has had a major impact upon new housebuilding, enabling over 74,000 purchases in England, with 81% of purchasers using the scheme being first time buyers (source: DCLG, as at 31 December 2015) . In November 2015, the Government announced that Help to Buy (Equity Loan) would be extended until 2021, and that the equity loan percentage would increase to 40% in London.
There has been an improvement in the availability of mortgage finance over the past few years, with gross mortgage lending continuing to increase on the prior year. The Council of Mortgage Lenders announced that gross mortgage lending reached £245 billion in 2016, up 11% on the prior year (2015: c. £222 billion).
Mortgage rates are at historic lows, reflecting the attractive interest rate environment and the range of products available.
Bank of England average mortgage rates
(1) Data source: Bank of England.
(2) Monthly interest rate of UK monetary financial institutions (excl. Central Bank) sterling 2 year (75% LTV) fixed rate mortgage to householders (%), not seasonally adjusted
(3) Monthly interest rate of UK monetary financial institutions (excl. Central Bank) sterling standard variable rate mortgage to households (%), not seasonally adjusted
The shortfall in the supply of housing stock and the greater availability of mortgage finance has meant that house prices have risen since the market recovery began in 2013, with house prices now back to 2007 levels. According to Halifax data, the UK average house price in January 2017, was £219.741 up 3.4% on the prior year.
(1) Data source: Halifax
With the current attractive interest rate environment, mortgage affordability metrics are running below historic averages. According to Halifax affordability data, which is based on mortgage repayments as a percentage of income, the index is close to an all-time low level.
Overall, the outlook for the housing market continues to be positive, with supportive government schemes and an attractive mortgage environment. Underlying demand for new housing is expected to remain strong in the long term but based on the current level of new housing starts, supply is unlikely to meet this demand in the short term.
© Barratt Developments PLC 2017