James ConeyNov 21 2018

Warning signs of property stagnation

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Warning signs of property stagnation
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A huge question mark hangs over the housing market at the moment.

It is always dangerous to look at figures for just one month, but there is a pattern starting to build up here, namely falling sales, startlingly higher borrowing, and estate agents and surveyors reporting worrying falls in business.

Most eye-opening from the UK Finance figures for September was the decline in first-time buyers – slipping 4.5 per cent from the previous year.

Home-mover mortgages dropped by 8.4 per cent. Remortgages kept the overall business levels strong.

It was in August I first started to worry following a series of troubling data.

Prices in London had begun falling at their fastest rate since the financial crisis, with regions such as the north east, Winchester, Oxford and Blackpool also losing value. Overall UK prices slowed to their lowest level since 2013.

The number of properties on sale tumbled by as much as 65 per cent in some areas. This, for me, was the only thing keeping prices up: a lack of supply.

Most eye-opening was the decline in first-time buyers, slipping 4.5 per cent from the previous year.

And in the middle, buy-to-let continued to collapse.

Beneath the headline September figures is the most troubling data. In the course of a year, loan-to-values on first-time buyer mortgages have increased to 85 per cent. Average borrowing has risen by £6,000 to £145,000.

Income multiples are up, repayments as a proportion of income are up, borrower income is up.

This all paints the picture of a market that is stretched toits limits.

Now you may say that borrowing costs are cheap and this is something not to be overly concerned about: after all, average multiples are just 3.68 times income.

Is it rates, I wonder, that is causing the current stir in the market? I cannot imagine many first-time buyers or people moving home are studying the detailed economic data, but they must at least be aware that the general direction of interest rates is up.

(I don’t believe for a minute this is Brexit nerves – the man and woman in your non-metropolitan town is not making life decisions based on what may happen next March).

Wage growth is now at a 10-year high of 3.2 per cent, and even measured against inflation it is climbing at its fastest rate in two years. It is about time too, given that the economy is at near full employment, but it does not paint a pretty picture for the base rate if you are a borrower.

If consumers really are nervous about the state of the economy, we could see increasing numbers paying down debt than splashing out this Christmas.

Either way, I am not confident about the housing market at the moment. To me it smells like the incredible bull run may be about to come to a juddering halt.

Property beats pensions

When you look at public perceptions of pensions it really is rather dispiriting.

Ploughing through polling from Ipsos Mori, I stumbled across its Issues Index for October, which picks out what people are most worried about in Britain.

Just 1 per cent were worried about pensions, social security and benefits – fewer than were worried about a lack of faith in politics. It was the same as race relations, drug abuse and public services (not including the NHS).

Ipsos’ perceptions of money survey (which was from 2015) lays bare how people routinely make wild assumptions about everything. For example, they think the cost of raising a child is £50,000 – when it is closer to £229,000.

And they think that they only need to save £124,000 to get an annual income of £25,000 a year. Good luck with that.

As always though, when it comes to house prices, everyone was more or less spot on about average prices.

Only when we get out of this obsession with property will we ever start to save more.

Don’t feed the trolls

The debate over equalising the women’s state pension age is one of the most toxic I have ever witnessed while writing about finance.

Twitter is packed with people who seem to relish nothing else than heckling, accusing, and insulting those who feel they have been hard done-by. Some of these know-it-alls are financial services professionals who seem to think that just because they heard of the state pension rises, then everyone must have.

It is shameful and shows a dreadful lack of understanding about personal circumstances and the complexities of life.

The Waspi campaigners – whatever you may think of them personally – must be allowed to state their case: the government will either hear them, or not. But they deserve to do it without being shouted down by internet trolls.

James Coney is money editor of the Sunday Times