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Trends between unemployment and home repossessions in the UK

Gavriel Merkado

January 7, 2020

Gavriel Merkado (pictured), founder and chief executive REalyse

Some trends are more obvious than others, some would appear obvious to anyone looking at certain areas of the property market regardless of their level of expertise in the field.

Unemployment figures in the UK fell to a 45-year low at last count but fluctuations continue to occur across the country providing knock-on effects into the stability of home possession.

Segregating the past six months, despite the overall decrease in unemployment figures some areas did experience an increase.

Brighton, Croydon, and Norwich, in particular, experienced their lows in 2015/16 with an increase soon after.

A rise in unemployment should theoretically result in a simultaneous rise in the number of home repossessions in the area.

Yet the data from the REalyse system goes against this idea.

If people are without jobs, how can they afford their mortgages or rent?

In these three areas, as well as generally across the UK, our data suggests that unemployment and repossessions are correlated, yet lagged, with unemployment moving first.

In Brighton, we see a 61% decline in repossessions and a 57% decline in unemployment but the decline in repossessions flat-lined roughly three years after unemployment rates.

Last month this report from UK Finance (the organisation that collates information about arrears and repossessions) stated that buy-to-let mortgage repossessions had increased 40% overall compared with the same period last year.

Using Hemel Hempstead and Cardiff as two additional examples, our data shows both unemployment and repossessions have been rising.

These are outliers, this pattern is not uniform across the country where repossession levels are remaining static and low.

There are a few things to keep in mind; the government often changes how it measures statistics, usually in line with the political slant of the month.

Therefore, there may be a reason behind the rise in unemployment within certain areas over the past year.

Based on the data we have, there appears to be a bond between unemployment levels and home repossessions.

With changes in repossessions lagging three years behind changes in unemployment, then the level of unemployment in 2019 should correspond to a level of repossessions in 2021.

If the level of unemployment in 2019 is the same as in 2013, then the level of repossessions in 2021 should be the same three years on, in 2016 (i.e. 2013 plus three years).

This would be a 20% higher level than what is being experienced today, and a significant trend to look out for within the industry.


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