Estate agents and buy-to-let landlords feel the squeeze as Trussonomics begins to have an impact
The cost of an average house in Croydon has increased by 92.4per cent in the 10 years since 2013, according to research based on figures from the Office for National Statistics.
Yet while the overheated housing market continues because of the chronic lack of accommodation available at social rents, the cost of buying a home in Croydon has been outpaced in other parts of the country, and other London boroughs.
This longer-term view of the housing market won’t reflect more recent changes in the economy, with soaring interest rates deterring new buyers following the disastrous Tory mini-budget last autumn by KamiKwasi Kwarteng during Liz Truss’s abortive premiership.
The Bank of England official interest rate now stands at 4.25per cent – double what it was at the start of November last year. And that’s put the squeeze on millions of people’s mortgages, some of whom have seen their monthly payments double since the turn of the year.
This has got the house-hopping wheeler-dealers, who like nothing more than to discuss the rising value of their property over a carefully chilled Chablis at a dinner party with their chums, in a bit of a lather, as inflation and interest rates chip away at the property market.
Without bringing themselves to admit that the latest house price crash has been caused by the Conservative Government, yesterday’s Torygraph bleated, “Across Britain, homes are getting listed at prices far below what they would have sold for during the pandemic as homeowners, buy-to-let investors and first-time buyers alike creak under the strain of high mortgage rates and the cost of living crisis.
“But the pain has only just begun – and it will be driven by the mortgage market.”
This is pain in the perverse sense of reduced profits on homes, rather than the pain inflicted on the nation by soaring inflation and the biggest cost of living crisis seen for a generation. It might also be seen as the latest slight adjustment to property prices, after decades of price rises.
The Torygraph predicts a “slow-motion crash” in house prices “more akin to the early 1990s downturn than the sudden, but short, 2008 crash”.
The reality is that, with each Tory-inspired “boom” over the past 40 years of Thatcherite I’m-alright-Jack economics and the disaster that is Right To Buy wrecking the social housing supply, there has followed a crash which has wiped tens of thousands of pounds off the value of ordinary people’s pension pots and life savings.
This, in turn, has created more financial dependency on how they can cash in on what ought really only ought to be their home, rather than some highly-geared nest egg.
House prices in March were down by 4.6per cent compared to their peak in August 2022, according to lender Nationwide’s seasonally adjusted index. In August, the average home in Britain sold for £273,751. In March this year, this figure was £257,122. That’s a 6per cent drop.
Again, this is just a recent snapshot, and overlooks the relatively big increases in property prices during the pandemic and into 2021, as many city dwellers sought to up-scale their homes and move out of town.
And the reason that the property pages of the likes of the Torygraph, the Mail and the Evening Standard are full of this is that the current market wobbles will affect three distinct groups of people hardest: the estate agents (whose high-revenue ads fill so many pages of newsprint every week), those people who have stretched to far for a bigger mortgage to buy a top-end house (“as expensive houses being purchased with large mortgages become unaffordable”, as the Torygraph put it), and buy-to-let landlords.
These landlords no longer get the generous, state-funded tax breaks which allowed them to offset their mortgage interest against profits, and many are now expected to exit the market, flogging off the investment flats they have bought, contributing to the downward pressure on house prices.
But it is “downward” only compared to the immediate recent period, back to 2019.
Overall, house prices in the bubble that is London and the south-east have shown spectacular growth since the 1980s, as the public were encouraged to pursue the Tory wet-dream of home ownership and public bodies, including councils, trusts and even the Church of England, were eased out of providing social housing by Right To Buy social engineering.
Thus, if we look at a medium-term picture, the cost of an “average” home in Croydon has increased from £225,826 in 2013 to £434,426 in 2023. That’s right, an increase of more than £200,000 in the value of the property where you have been able to live for the last 10 years.
There’s a similar picture in Sutton, where an average house price of £243,568 in 2013 has increased to £445,260 in 2023 (an 82.8per cent increase).
In neighbouring Bromley, you need half-a-million (or, at least, a mortgage to that value) to be able to buy an “average” house in 2023, as prices have gone from £286,846 in 2013 to £519,294 in 2023 – an 81per cent increase.
The reasons for Croydon’s increase in house prices being at a bigger rate over the past decade when compared to Bromley and Sutton will vary from property to property. Certainly, having one of the highest rates of Council Tax in the capital, with householders paying more for fewer local services after the Tories 15per cent hike this month, is likely to put a dampener on demand for homes in Croydon for some time to come.
But what the research conducted by online investing review platform Investing Reviews shows is that there are some parts of the country where the economics of the housing market have been even more bananas than in this sector of south London.
In Hastings in East Sussex, there has been a 124.1per cent increase in property prices over the last decade.
Waltham Forest, another outer London borough, saw the second-biggest rise across all local authorities in the country, at 116.4per cent.
But these increases are all relative. If prices were low to begin with… Barking and Dagenham was among those areas where prices more than doubled in 10 years, with a 110.60per cent rise in house prices, going from £167,919 (a lower average price than 2013 Croydon) to £353,635 (£80,000 lower than Croydon in 2023).
Spare a thought for the unlucky home-owners who bought a house in Aberdeen in 2012 or so… it is the only area in the whole of the UK where there has been a decrease in property prices (15.3per cent, as it happens) over the past 10 years.
Other places with the lowest rate of growth over the decade – Kensignton and Chelsea, City of Westminster, Hammersmith and Fulham – have seen house prices increase by “only” by 19per cent to 24per cent. But these are where an “average” house in 2013 already cost at least £600,000, and where similar homes now carry a price tag of up to £1.3million.
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