The housing market's biggest problem

Robert Powell looks at the key factors that are holding back a housing market recovery...


It’s rare to switch on a TV or radio nowadays without tuning into talk of some sort of crisis. And the economic uncertainty these crises are instilling in the British economy is taking its toll on the UK housing market.

Almost 90% of respondents to a Royal Institution of Chartered Surveyors (RICS) poll cited uncertainty about the economy as the key factor holding back the property market. After this, 70% of the surveyors questioned said availability of mortgage finance was restraining recovery in the sector, while 42% pointed to house price falls.

For Ben Thompson, Managing Director of Legal & General Mortgage Club, confidence is the key factor stopping the market returning to normality. “People aren’t confident that employment outlook is good. They’re worried about what’s going on in the Eurozone. House prices are also broadly flat and in some areas they are falling,” he said.


But despite the factors currently weighing down the housing market, mortgage rates are actually remarkably reasonable.

Figures from the Council of Mortgage Lenders (CML) show that home loans are at their most affordable in eight years. Average monthly interest payments now typically make up 12.3% of income.

But while affordability is up, availability is still stagnant. In October, 44,500 home loans worth £6.5 billion were advanced, down from 48,200 (£7.1 billion worth) in September.

Jayne Walters from the CML said: “Unfortunately there are plenty of people who don’t meet the lenders' affordability criteria. And for those it’s proving quite difficult to get on the market”.

Stamp duty

Many expect transaction levels to pick up in the first few months of 2012 as the Government’s Stamp Duty holiday on properties worth up to £250,000 comes to an end in March.

However if history is to be believed this increased activity may not last. The last Stamp Duty holiday that ended in December 2009 produced a spike in transactions, followed by a slump. And according to the CML, this may well happen again.

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