The Uk Property Market

UK Market

Barely a day goes by without one paper or another commenting on the potential rise and fall of the UK property market, and with this comes the speculation surrounding the buoyancy of the UK mortgage market. It is not difficult to see the direct link between the property market and the mortgage market.

UK Property Market

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Having established the direct link between the mortgage market and the property market, it makes sense firstly to consider what has been happening in the property market, recently.

Property prices and the market in general have been a hot topic of conversation of late, with an equal number of pundits claiming that the property market is heading for a big crash as there are experts arguing that the best in terms of prices is yet to come and that values will continue to soar.

One thing that cannot be denied is that the market has cooled slightly in the last year, following the huge surges in prices seen in the earlier part of the 2000s. However; despite speculation that property prices were set to plummet, this has not seemingly come about, with only a few areas experiencing any form of dramatic slow down and most areas continuing to grow at a healthy rate.

The market itself is confident, particularly as employment is at an all time high and individuals are generally feeling more affluent due to the stable economic environment that we are currently experiencing. Another driving force has been the very public failings of many pension schemes. More and more people are recognising that if they wish to secure their own financial future, they will have to do more than simply paying into a company pension plan. Property is seen as one of the main ways to provide for retirement, with the buy to let market showing no sign of slowing down and, in fact, continuing to outstrip all other types of property purchases.

In the early part of 2007, the number of mortgage applications rose again, bouncing back from the weaker performance seen in the latter part of 2006. In February, the Bank of England reported that lenders had approved a total of 120,000 loans, a substantial rise on the 114,000 applications made in the previous December. This has shocked some economists who predicted that the market would cool dramatically after the recent interest rate increases.

Other analysts feel that borrowers are keen to secure fixed rate offers now, before any further increases happen and that this ‘panic’ mentality is now, in fact, driving the market.
Although the market remains amazingly resilient, it is clearly a lot cooler than it has been, in recent times, which is certainly thought to be good news, as experts feared that the market was heading for a meltdown. A slight cooling is likely to be beneficial to all involved with the huge crash as seen in 1991 hopefully being avoided.

David Stubbs, of the Royal Institution of Chartered Surveyors stated: ‘The strong economic growth and rising employment, enjoyed by the UK at present, is supporting housing demand, even in the face of recent increases in interest rates...while activity is past its peak and should slow gradually in coming months, price rises will continue as the market moves towards a 'soft landing'.

At the height of summer last year, the monthly mortgage application rate was approximately £30 billion; this dropped to a figure of approximately £28 billion towards the end of the year which was considered to be a much more sustainable rate. The trend has now reversed and lending topped £31 billion in March 2007.

Experts believe that the housing market will continue to grow for at least the next three to five years, with demand outstripping supply. More and more people are choosing to live alone for longer as well as an increasing population means that there simply aren’t enough properties in the UK, at the moment. It has been predicted that by the end of 2007, there will be an additional 250,000 houses available, but that this will still be insufficient to meet with demand. Equilibrium in the market is predicted to occur no earlier than 2010 and more likely closer to 2012.

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