Good News On UK Property Hides A Trap Door

UK Property For SaleRightmove released some worrying new research this week on tenants that paints a sobering picture of the UK property market. This latest research comes after some positive news from the Halifax on UK property prices and looks to have put the brakes on any illusions of things getting back to ‘normal’.

On the face of it the market looks as if it has picked itself up, much like an injured patient recovering from being on life-support and slowly hobbling towards some kind of meaningful recovery.

The annual change in UK house prices sounds good, a stagger towards 2% growth annually and a 1.1% rise between March and April. These numbers sound positive – at least until you take a closer look at some of the regional variations and realise that things are not as healthy as they should be.

The South West of the UK saw an annual fall of 3%; the East Midlands 2% and Yorkshire a 2.1% decline. London, meanwhile, saw prices rise 4.3% in the same period and Scotland a 9.3% rise albeit fizzling out in the last quarter – 0.1%. The traditional spring bounce has also yet to get started.

While the case for investing in London property is never in doubt, if we look at the UK as a whole, there is anything but a recovery underway no spring bounce and little hope for those wanting to take a step on the housing ladder.

Lying beneath the headline numbers are what Rightmove calls ‘trapped renters’ or those without the means to buy a home of their own. More than half of them (58%) have yet to start saving for a deposit.

This puts those renters around £30,000 short of the money they need to stand a chance of buying a home. Worse still, if the 3,214 tenants surveyed by Rightmove reflect the UK as a whole, they spend an average 37% of their income on rent.

This is up from the 21% and 26% of their income just two years ago in 2011 – the maximum level at which rent becomes unaffordable is 30%.

Tenants are already struggling to meet payments, yet rents are 4% higher on average in England and Wales, while unpaid rent and arrears have risen from 7.4% in February to 8.5% in March. This hints at a tipping point being reached.

Normally at these levels property becomes more attractive to buy rather than rent, however even though property prices remain relatively static or falling outside London, people are reluctant or unable to save the money it takes to raise a deposit.

This is blamed either on a lack of confidence to invest or wage growth which has been sluggish at best in the past five years. The banks have also tightened up on lending recently adding further hurdles.

Headline figures reported by the Halifax and the Nationwide do a very good job of covering the real state of the UK property market, however with all the foundations of a healthy housing market missing such as availability of finance, wage growth and demand, it will be some time before we see property in the UK as the sound investment it once was.

What are your thoughts on the UK property market? Please leave your comments below:

Kind regards

Brett Tudor
Property Expert

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Categories: Property Invest / UK property

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