Having successfully navigated another pre-Christmas period (and having caught my annual flu/cold prior to the break which was slightly unusual) I particularly looked forward to the festive break for both me – but more importantly – the lovely folk I work with in and out of Affinity.
Time for a reset. Time with family. Time away from mentioning the ‘M’ word…
One of my very good friends said to me that she felt that the market in 2024 had retracted another 5%, and my response was… “well, that makes sense now.”
NEW REALITY?
But that got me thinking: perhaps this is the market? I say that because we have been putting mortgages for purchasers together all year, following the bubble that was created when everyone realised that when two of you are working in the same household we just couldn’t even hold a zoom call without the dog jumping into frame, or a child asking for a peanut butter sandwich just as you try to explain the difference between a fixed rate and a tracker…
At the time, I felt that the post-Covid market was unbelievable, but looking back it makes total sense. It could it have been a bubble – low interest rates and realising that we simply made do with where we lived – right up until the point we had to spend so much time there… so we had our bubble!
According to The Times, over the past two decades the average house price-to-earnings ratio in the UK has increased significantly, indicating a decline in housing affordability. In 1999, the ratio was approximately 4.4. By 2023, this ratio had risen to around 8.6, with the average house price equating to 8.6 times the average household income.
House prices have risen at twice the rate of wages since 2000, creating significant challenges for first-time buyers. The lack of sufficient housing to meet the growing population has contributed to this disparity. Affordability varies across the UK, with Northern Ireland being the most affordable, and London the least affordable, where the average house costs almost 35 years of income for the bottom 10% earners.
BACK TO BASICS
My firm belief is that we need to take on board some of those old school values to achieve home ownership for our young people. The responsibility of teaching those lessons to youngsters comes down to the parents, educators and the media. They need to explain what those choices are, and not simply to rely upon lenders, regulators and governments to wave a magic wand which simply does not exist.
Work hard, save hard, make sacrifices when you are young to achieve long-term prosperity; it’s a little old fashioned but I truly believe it’s a lesson that needs to be learnt.
The trappings for youngsters are real, and the explosion of easy credit for cars and watches and the social media culture that is the world we all live within, as well as the get rich quick lessons of scale and sell all must have an effect. Of course, the older generation explaining to the young ’uns that “it’s all gonna go pop” probably doesn’t help. Supply and demand will retain strength within our housing market and frankly we have thrown just about as much as could be thrown our market over the last few years – and all that’s happened is prices have risen!
Truth be told, if a house becomes a home, we make good choices and our principal objective becomes the repayment of our mortgages; house price fluctuations really shouldn’t make any difference any way.
These are societal changes and for me, we need to get comfortable with long-terms goals being the ‘Flex’ for 2025. We – the older generation and advisers – should encourage this behaviour when and where we can!
