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Housing Market Is on Fire, Says Andy Haldane

Housing Market Is on Fire, Says Andy Haldane

The chief economist of the Bank of England has spoken of the positive effects of several government incentives for homebuyers, describing the current state of the UK Housing market as “on fire”. Coupled with additional savings accrued during lockdown, Andy Haldane said that the stamp duty holiday was fuelling demand for rapid property purchases.

“As things stand, the housing market in the UK is on fire,” he said during an online seminar the University of Glasgow, which focused on wealth inequality and the growing housing crisis.

Official data suggests that the average property values for March were up in excess of 10% compared to the same time last year. Record-high house prices and predictions of further growth have dealt an additional blow to those already affected by wealth inequality and the inability to get on the housing ladder, Haldane commented.

Demand Continues to Outstrip Supply

The temporary stamp duty holiday introduced by Rishi Sunak last year generated a major spike in property purchase intent across the country. With many thousands of buyers attempting to accelerate property purchases to take advantage of savings of up to £15,000, demand quickly outstripped supply in most areas of the UK.

Property prices began climbing faster than they had in many years, as movers and first-time buyers set their sights on spacious properties away from busy urban centres with private outdoor living spaces.

Unfortunately, Haldane made it clear that there was not a great deal the Bank of England could do to intervene with the surge in property prices. He pointed out that all planning rules, tax rates and housebuilding initiatives were the sole responsibility of the government not, the BoE.

Unsustainable Momentum?

Elsewhere, others have predicted that the housing market will inevitably overheat over the coming months, having built the kind of momentum that is likely to prove unsustainable.

“We’re back to the kind of double-figure house price rises we saw in the heady days before the financial crisis [of 2008],” warned Hargreaves Lansdown analyst Sarah Coles.

“And while lenders are far more cautious than they were back in 2007, in this kind of market, there’s still the risk buyers will lose their heads, and make a property mistake that could haunt them for years.”

Her sentiments were shared by SPI Capital chief executive Anna Clare Harper, who highlighted the unfortunate difficulties first-time buyers are likely to face while property prices remain disproportionately high.

“The effects are clear: with wages rising significantly more slowly than house prices, affordability constraints are increasing,” she said.

“This is creating huge inequalities between older and younger generations, and growing demand from both younger and older renters who are priced out,”

“For first-time buyers, this is a hideous market. With average prices up £24,000 in a year, saving a 10% deposit needs £2,400 extra in savings.”

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