Whatâs Going On Here?Data out on Tuesday showed UK house prices rose at their fastest annual pace since 2004, in a frustrating game first-time buyers donât have any chance of winning. What Does This Mean?UK house prices have been pushed up and up by ultra-low borrowing costs, a limited supply of properties, and a temporary tax break on purchases (that, as of Wednesday, will be phased out). Plus, Brits have had their hearts on upsizing after a year spent staring at the same four walls. So much so, in fact, that London was actually one of the weakest-performing regions as homebuyers swapped the urban hubbub for tense village politics. All in all, itâs driven the average house price to a record $353,000 â a figure which both threatens to broaden the wealth gap and leave the next generation of buyers out in the cold. Why Should I Care?For you personally: Wonât somebody please think of the children?
Itâs true that the typical mortgage payment isnât actually all that high compared to monthly salaries by historic standards, thanks to record-low rates. But cheap mortgage payments donât mean much if you canât afford somewhere in the first place, and house prices relative to average incomes are close to an all-time high. Thatâs making it harder than ever for prospective first-time buyers trying to get their foot on the property ladder.
Zooming out: Itâs the same story all over the world.
House prices arenât just soaring in the UK: data out last week showed average US house prices rose 24% in May compared to a year ago, hitting a record high for much the same government-stimulated reasons as the UK. And now, Bloomberg Economics has pointed out that certain indicators â like the ratio of global house prices to rent or localsâ salaries â are higher than they were even in the lead-up to the 2008 financial crisis, suggesting this bubble could be about to burst. | 