Progress in the Property Market will Benefit Landlords
Around one million people are expected to move house due to an improving property market, it was recently announced.
The Ernst & Young ITEM Club have used the Treasury’s economic models to predict that the amount of housing transactions will increase by 7.5% this year. They have also referred to Chancellor Osborne’s plans to guarantee £130bn of mortgages leading to housing transactions rising by another 7.8% next year.
The chief economic advisor to the ITEM Club, Peter Spencer, has discussed the predictions. He says: “With export markets continuing to disappoint, the Chancellor has focused his firepower on the home front. And the timing couldn’t have been better. Real incomes are already starting to recover, mortgages are becoming more readily available, and homes are more affordable, as the house price-to-earnings ratio continues to fall. Although it’s not a long-term strategy, stimulating the housing market and the high street will keep GDP growth positive. Unbalanced growth is better than no growth.”
The Government’s new Funding for Lending Scheme (FLS) will allegedly lead to more people being able to buy a property, as it will decrease costs of mortgages, according to the Club. They have also supported the controversial Help to Buy scheme.
Spencer explains: “We expect [the scheme] to boost the number of housing transactions, particularly at the lower end of the market where the deposit and low equity have been a major constraint.
“We should start to feel slightly better off this year, which will help to loosen the purse strings. Consumer spending added 0.7 percentage points to GDP in 2012, and the Chancellor’s budget will help ensure the tills continue to ring for some time yet. Consumers have been burnt by the experience of the recession, and are much more cautious with their finances. Households are likely to continue paying down debt rather than racking up huge credit card bills.”1
Progresses in the property market will benefit landlords, as there will be less pressure on the private rented sector.
Additionally, should the property market become steadier there is the chance of landlord insurance policies to become cheaper, as there would be less risk of tenants falling into rent arrears.
The next few months will uncover whether the ITEM Club’s forecasts are accurate, and whether the housing market will bounce back to pre-recession status.