There is nothing as safe and predictable as bricks and mortar – so the theory goes.
But the news, announced this week by Rightmove that the British housing market has experienced an unexpected shift with house prices falling in London and rising in the South East.
Coupled with the governor of the bank of England predicting interest rate rises and the overall market seemingly fragmenting has opened up the fear that the accepted wisdom may not be quite as dependable as it once was.
Before we get too panicked by the latest figures, we should acknowledge that what is happening comes from a complex set of issues that have very different impacts in different areas.
For example, a headline grabbing drop in the value of property in up market areas of London such as Knightsbridge and Kensington, may have little meaning if you are looking to sell a two bedroom terrace in Sheffield or Solihull where the national ‘average’ asking price of £294,542 may seem slightly out of kilter with the local market.
The Royal Institute of Chartered Surveyors (RICS) pointed out earlier this month that the market is suffering from an imbalance between supply and demand and that this is acting as an overall break on activity. RICS reported that there are fewer houses on the market than at any time since 1978. In effect the problem is that anyone looking to sell may not struggle to find a buyer, but they may struggle to find somewhere else to buy.
One increasingly popular solution is to sell up and move into rental property and then using the lack of a chain and a healthy deposit (secured from the earlier sale) to leverage a quick mortgage offer and a quick sale. Many homeowners are turning companies like Fast Sale Today who specialise in achieving fast house sales that sidestep the long jam of selling through a traditional chain.
Aside from the macro-economic impact of what happens at the bank of England, interest rate rises invariably slow the housing market as mortgage rates rise. Another major impact on the housing market is the way that first time buyers have been largely replaced by buy-to-let landlords who have less difficulty securing funds than first time buyers. This shift in buyers is skewing the supply and demand equation at the lower end of the market.
Although getting onto the property ladder is getting harder, there is still nothing quite as secure as owning the roof over your head. However the reduced supply, a shortage of mortgage lending and a recalibrated level of demand are making for some uncertainty in terms of how someone can begin to invest in bricks and mortar. But for those in the happy positon of having some equity, at least there is the consolation that they have not missed the boat. In a time of uncertainty, concrete certainty has its own value.