High house prices mask a sluggish market: CML

High house prices mask a sluggish market: CML

Rising house prices have only acted to mask underlying problems in the housing market, Bob Pannell, chief economist for the CML, has claimed.

According to Mr Pannell, rising prices do not mean more properties available, or that more mortgage-funded purchases are actually taking place.

Despite the CML recently increasing its predilection for the number of property transactions in 2014, he said this would only be a modest 3 per cent.

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Furthermore, this figure did not signify a definite increase in mortgage-funded purchases, as cash purchases have accounted for as much as 37 per cent of all transactions so far this year.

Mr Pannell said purchases were likely to be little more than 1.2m this year, which might appear to be a recovery from the depths of the recession, but he warned: “Current transaction numbers are no higher than they were in the mid-1990s – a period when activity was depressed by a large number of home-owners caught in negative equity.”

He added: “Given that, since then, the size of the UK’s housing stock has increased by a third, it makes current levels of market activity look decidedly sluggish.

“Even if government policy helps to deliver the 300,000 homes needed in the UK over the next decade, government measures are needed to nudge towards better use of current housing stock to ease the situation.”

Pad Bamford, business development director at Genworth Financial, said: “There are some long-term structural problems with the UK housing and mortgage market, which require joined-up thinking and long-term solutions rather than short-term sticking plasters.

“A huge part of this is the supply/demand imbalance and the simple fact that, as a country, our recent new-build activity over a number of years has been severely inadequate for today’s societal and demographic changes.”

Adviser view

Jonathan Harris, director of London-based Anderson Harris, said: “Housing is an emotive issue, and we have a generation of youngsters who are having to get used to the idea that they may not be able to afford their own home – or at least not for many years yet.

“It is a situation that is only going to get worse unless long-term, workable solutions are found.

‘There has long been a deficit between the number of new homes being built and what is required for many years. Housing is such a priority and the government must put it at the top of the agenda.”