Recent data from July 2023 may suggest a slowdown in the UK housing market, but it’s crucial to understand this in context. Land Registry figures show a 1.9% annual growth in house prices as of May 2023, albeit down from April. Despite this dip, the long-term factors that set the current market apart from past downturns like the Global Financial Crisis (GFC) of 2008 and the early ’90s recession are still relevant.
Stringent lending criteria, along with over 60% of mortgaged homeowners having at least 25% equity in their homes, continue to provide a robust foundation. Furthermore, low unemployment rates, hovering around 3.5% and predicted to rise only slightly, offer an added layer of financial stability, reducing the likelihood of mass sell-offs.
What also makes today’s market distinctive is the banks’ low appetite for repossessions, a far cry from the 100,000 annual repossessions in the early ’90s and 50,000 during the GFC. The rate is around 0.04%, indicating that banks will likely explore other options before moving towards foreclosure.
Add to this the increase in ‘opportunistic’ cash buyers, now constituting about 25% of all transactions. This reduces the risk of panic-induced price corrections and suggests more calculated, long-term investments.
The landscape is also aligned with predictions from JLL’s October 2022 report, which anticipated a 6% price fall this year but painted a resilient long-term outlook. With a projected shortfall of 610,000 homes over the next five years, supply constraints will likely drive future price gains.
In summary, although short-term fluctuations may occur, the UK housing market’s unique attributes make it a resilient and promising long-term investment.