There is speculation that prices may fall following the vote to leave the European Union. Recent data published by Rightmove this week backs this view up, with the property website suggesting asking prices fell 1.2% between June and July. Other indices such as Nationwide show that prices remained stable, and it will be interesting to see what the next batch of Land Registry and ONS data says.
Would-be buyers hoping for a boost from lower prices shouldn’t rejoice too soon, however. In the long-term and assuming we see no major recession and spike in unemployment, strong fundamentals will continue to support price growth across much of the country. Demand will outstrip supply, and it is unlikely that even the most ambitious of housebuilding programmes will radically alter this imbalance anytime soon. As a result of price increases, many first-time buyers will continue to struggle to get on the property ladder – and policymakers therefore shouldn’t let a short-term blip distract them from the need to improve prospective buyers’ hopes of success over the long term.
IMLA explored the effects that a lack of supply is having on first-time buyers in its latest report, The politics of a rationed housing market. The report found that schemes designed to help first-time buyers like Help to Buy have largely failed to achieve their goals; between 2007 and 2015, IMLA found that the number of first-time buyers was 2.2 million lower than expected given demographic trends.
While many of the current schemes are designed to aid mortgage affordability, the report also suggests that a key challenge facing first-time buyers is mortgage accessibility. Saving for a large deposit remains one of the most significant barriers to home ownership, but would-be buyers are also struggling to access sufficiently sized mortgages – which the implementation of the new Basel rules could make even more difficult.
In order to improve things for first-time buyers, the government needs to encourage rather than discourage increased innovation in the mortgage market. There is an enormous need for joined up thinking from government, regulators and industry – not least around stimulus measures that may appear in November.