MortgagesNov 25 2015

Is the UK housing market a ‘bubble’?

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Is the UK housing market a ‘bubble’?

The increase of the inheritance tax threshold and the Help to Buy Isa are just two factors fuelling the common view the UK housing market is often referred to as a “bubble”. While a number of analysts said the government’s Help to Buy Isa being launched on 1 December could have an impact on the housing prices, others believe it is a long-term initiative.

“The impact on the housing market is difficult to say because it is more of a long term thing,” Daniel Bailey, a mortgage adviser at Middleton Finance, said. “Buyers need to save over a number a years for deposits and so I do not know what impact it will have on house prices because it depends on many houses we are going to be building as well. But we are clearly not building enough houses at the moment.”

A recent report from Age Partnership also points out that the total property wealth of those aged 55 and older will double to almost £2.5tn by 2035. Figures show that over-55s are currently sitting on a £1.2tn worth of property wealth but in 20 years time, this is forecast to rise by 105 per cent if property prices in the UK rise by a modest annual average of 2 per cent.

The report further states that even if house prices remain flat, housing wealth could increase by 38 per cent by 2035.

While this is good news for those looking to fund their retirement by cashing in on rising property prices, it also means that those trying to get on to the property ladder will find it difficult to afford a house. Chart 1 shows the forecast of UK house prices from 2015 to 2019. The data, from real estate firm Jones Lang LaSalle, highlights that while house prices will continue to grow until 2017, they will slowly decline in 2018 and 2019.

“I just don’t see a bubble where I am, I think it is very much regionalised in certain pockets of the UK,” Mr Bailey said.