London has long been known as easily one of the most expensive parts of the country when it comes to day-to-day living, with the house prices themselves being no exception. The capital’s housing market got a bit of a nasty shock at the end of last month however, when Nationwide reported some unexpected findings.
Buyers being squeezed out
For the first time in 8 years, London’s average house price fell, dropping by 0.6% year-on-year in September. Marking the figures out as even more significant, this also meant that the city was the weakest performing region in the UK for the first time since 2005. Though central areas had indeed fallen slightly in the past, flourishing suburban areas on the outskirts of the city had until now kept prices on the incline overall.
An estate agent speaking to the BBC confirmed that “the London market is struggling, mainly for affordability reasons.” He elaborated further by explaining that even though demand for homes remains high thanks to low mortgage rates and good levels of employment growth, poor household income is causing uncertainly amongst many would-be buyers, who fear they are being shut out of the market and simply can’t afford to take the financial risk of buying in such a notoriously expensive area, hence the dip observed last month.
A problem for the whole country
Though prices in the rest of the country continued to rise in September, they did so at the slowest annual rate since June 2013, suggesting nationwide difficulties in inspiring buyer confidence. It thus seems little coincidence that the government have just announced plans to put an extra £10bn into the Help to Buy scheme, which aims to assist young people in getting onto the property ladder for the first time by helping them to secure a mortgage with a considerably smaller deposit (often just 5%).
Prime Minister Theresa May said these plans will be outlined further in the Budget come November, but they have already attracted polarising opinions, with some praising the fact that the money could see as many as 135,000 people into their own homes, but others saying that rather than increase overall affordability, the scheme threatens to merely push house prices in desirable areas too high, freezing even more people out.
Either way, the announcement, coupled with the obvious difficulties in London, prove that there is indeed a problem surrounding a lack of access to the property market for many young people in modern Britain; a problem so deep-rooted is seems unlikely we’ll find any one quick fix.