IMLA: property inertia spells danger

Nia Williams

April 10, 2015

The second annual report from IMLA – The new ‘normal’ one year on: is the march back to a sustainable market on track? – examines trends in the mortgage and housing markets in order to assess the strength of the post-recession recovery.

It shows annual turnover of the private housing stock fell from over 12% to 4.5% over the last three decades. As a result, IMLA’s analysis indicates the ‘average’ home currently changes hands once every 23 years compared with every eight years during the 1980s.

The IMLA report argues that low housing turnover is driven by a combination of people buying their first homes later; by a larger private rented sector where turnover is lower; and by the baby boomer ‘hoarding effect’ where middle-aged homeowners are staying put, tying up a large part of the housing stock.

These factors are likely to keep turnover down for the foreseeable future, potentially limiting mortgage lending and restricting access to existing properties.

IMLA’s analysis also shows the estimated contribution of mortgage finance to the total value of UK housing transactions hit a new all-time low of 41.7% last year – just £4.17 of every £10 spent on house purchases in 2014 was funded by mortgages while cash or equity made up £5.83 (58.3%).

Despite forecasting a slight increase in gross mortgage lending over the next two years, IMLA expects the estimated contribution of cash (including deposits and cash purchases) to housing transactions will exceed 60% for the first time on record by 2016.

Peter Williams, executive director for IMLA, said: “These figures paint a picture of a housing market where turnover has drastically slowed in the last thirty years.

“Quite simply, in the absence of a sustained rise in housebuilding and improved affordability and turnover, the fact that properties are coming onto the market less frequently severely limits the scope for would-be first-time buyers to graduate to owning their own homes.

“Inertia in the property market spells danger for future owner-occupation levels, and the growing influence of cash and equity is sowing the seeds of a permanent social divide.

“Having said that, we will see some continued growth in mortgage lending – and as the market stabilises and wages rise, we may also start to see affordability improving.”

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