The impact of Liz Truss and Kwasi Kwarteng’s ill-fated mini-Budget on the housing market has long been a cause for concern. However, this week has demonstrated that we are finally shaking off the repercussions of what transpired last September.
The release of new data on house prices at the beginning of the week provided a compelling illustration. According to the ONS figures, house prices have increased by 4.1% in the 12 months leading up to March 2023. This translates to an added value of £11,000 for the average home, with the typical property price now standing at £285,000.
While there has been a monthly decline for the fourth consecutive time, with a 1.2% decrease in March 2023 following a slight drop of 0.1% in February 2023, the annual rate of growth has also slowed. Data from the Office for National Statistics indicates a decrease from 5.8% in the year to February 2023. It is worth noting that this marks a significant drop from the peak in July 2022 when house prices saw a 14.3% increase over the year.
Although these figures present a mixed picture, they indicate that buyers and sellers are finally overcoming the worst effects of last September’s mini-Budget. Undoubtedly, the market is in a stronger position now than it was at the end of last year.
Confidence is gradually returning, especially with the easing of inflation and the belief that interest rates have reached or are close to their peak. While there are concerns about the rising cost of food, household items, gas, and electricity, one particular disappointment lies in the Government’s indecisiveness regarding leasehold system reforms.
Regardless of one’s stance on the reforms announced by Michael Gove earlier this month, the decision to effectively pause any final verdict does not benefit anyone. Uncertainty is a catalyst for problems in the property sector, as evident from the pandemic. The government’s creation of uncertainty in this area will not encourage people to enter the property market and may lead to more landlords exiting the sector, potentially pushing rents even higher in certain areas.
Another notable story of the week was the Mayor of London’s announcement targeting empty properties in the capital. However, upon closer examination, it becomes clear that only about 30,000 places are likely to be addressed. Even if all these properties were magically made available for people to live in, it would barely make a dent in the ongoing property crisis unfolding in the capital.
While the idea has its merits, it appears to be more of a symbolic political gesture. What we truly need is long-term planning and a roadmap that provides a clear path out of the housing supply crisis. Unfortunately, such a plan is currently absent.