Spring has sprung and house prices seem to be shooting up at twice the speed of the daffodils.
But that could be about to change as |we approach Easter, a time of year when more people put their homes on the market.
I very much doubt that we’ll see prices fall but I do expect, and hope, that they will level off and take a lot of uncertainty and panic out of the market.
Apart from the property shortage, the Government’s Help To Buy scheme has played a role in pushing prices up as deposits have become more achievable to more first time buyers.
The lift in the economy has also helped raise prices as people are generally feeling more confident about their finances and employment.
Here in Brighton and Hove we have a very different property market to the rest of the country, including most of the south east. To understand it you have to factor in the London effect, which has distorted local figures, especially over the last couple of years.
It’s a complicated process but put simply, homes in London have become very attractive to people from overseas, including Russia, China and the EU, who are willing to pay what to us seems like grossly inflated prices. In parts of central London homes can cost £10 million, beyond the reach of locals. But even average prices in London are prohibitive. The average London home sells for more than £440,000, 16 times the local average wage.
Londoners who sell and are prepared to move away then pick Brighton and Hove as their number one destination. Our ‘city by the sea’ has an attractive lifestyle and they can afford to move here, thanks to overseas buyers buying their homes.
The result is prices are up in Brighton and Hove. The ripple effect gives residents extra cash so they can buy in parts of the city that Londoners don’t find as attractive, or don’t know about.
Good (sometimes) commuter links to London mean they don’t have to change jobs when they move to the coast.
Of course there are many other things that keep prices in check, the main one being affordability, which is partly controlled by banks and building societies who won’t want to see themselves back in the same place they were in 2007 when reckless lending led to the boom that went bust. They now have strict guidelines on lending which may slow down the price rises.
Buyers all have different circumstances. Some move because they have to, for jobs or family reasons or to get a more affordable mortgage, and others because they want to downsize or retire to a different area. If they need to finance the new property they will only get what a financial institution believes is the market value. Anything more they will have to find themselves. So these institutions still have a strong say on prices.
Interest rates are another limiter. If the Bank of England were to raise them, even by 0.5% it will add £25 per month to average repayments, and with wages lagging way behind inflation, budgets are likely to become very tight.
There is too much confusion and too many variables that can have an effect on our property market. I can only advise people to be sensible about what they are taking on.
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