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The SKY high price hype

Kate Faulkner says it’s about time we stopped talking about average house prices and discussed the cost to own a house. It makes so much more sense.

Kate Faulkner

Link to Kate FaulknerOver the last few weeks I have seen several articles from the likes of Sky News and This is Money which suggest getting on the ladder is impossible. The data and analysis that has been used just doesn’t work for me and our job as property people is to help put roofs over people’s heads and find ways, even in a tough market, to do so. Go to:

https://bit.ly/househype1
https://bit.ly/househype2

My least favourite use of stats is the rhetoric around London where the average price is £500,000+ so no-one can afford to buy there unless they are ‘rich’. But our answer should be ‘of course it is’ expensive. It’s a fabulous capital city and the problems of affordability in London exist in pretty much every country around the world. It’s a problem in most capital cities, yet still people who need to, mostly find somewhere to live.

When you read current media stories they tend to focus on:

  1. Are we in a bubble?
  2. Will house prices crash?
  3. Average earners can’t afford to buy
  4. It’ll take decades for people to save for a deposit

For me, these are the wrong conversations. What we should be talking about are:

  1. If we are in a bubble, what should buyers and sellers do?
  2. Property prices over time are guaranteed to do three things: rise, fall and stay the same. How can buyers and sellers cope with this?
  3. What schemes are available in your area to help people who can’t afford the ‘average price’ of a property.
    For example, the Government’s newly revamped site: https://www.ownyourhome.gov.uk/ explains all the schemes available, but availability at a local level is crucially what people need to know, even if you are an agent and aren’t selling them, it’s still in your interest to drive home ownership.
  4. If the stories suggesting it takes decades to save for a deposit are actually true – then why are there so many first-time buyers? And no, it’s not just down to the bank of mum and dad – most buy with their own money.

My thoughts are that as an industry we should be moving away from ‘average house prices’ (you know how I hate them!) when it comes to chatting to consumers and move more towards measuring the costs to ‘buy a home’ and the running costs of that home. And we know that even with the tiny rises that are happening this year to interest rates, the costs of a mortgage are still at an (almost) all-time low, so conversations around the cost of owning a home rather than the price paid are much more useful.

Conversations around the cost of owning are much more useful.

A good example of why these are better conversations comes from Andrew Montlake at Coreco. When we were chatting, he explained that in April 2021, 95% LTV mortgages had a rate of around 4% for a 5-year fixed deal. In today’s market, you can find them for under 3%, despite the interest rate rises we’ve just had. Although they may increase in the future, currently, it is possible for someone coming off their original 95% deal could be able to re-mortgage at lower rates – isn’t that a ‘great news’ story? And, as many are on repayment mortgages, this means that those on 95% from two or five years ago could have LTVs at 90% now, so again, they may not be impacted as much as expected, even though interest rates are rising. If we want buyers and sellers to have a less stressed move and ownership, one way we can make a difference is to move away from ‘what’s going to happen to house prices/rents’ and talk more about ‘how to get on the ladder if you are struggling with affordability’ and ‘how to stay in your new home, even if the market crashes’ would be much more helpful than the current unhelpful ‘everyone is doomed’ stories!

I would love to hear your thoughts of better content we could produce to help, rather than hinder activity in the property market: [email protected]

March 24, 2022

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