Is Housing at its most affordable level in 10 years?

There’s all sorts of conflicting information sloshing round the internet at the moment about the various strengths and weaknesses of the housing market, with different commentators prophesying either a sooner recovery than expected or imminent doom depending on which headline their aiming for. However, the piece of news that has caught my eye in recent days was the report from the Halifax, claiming that housing is at its most affordable level in 10 years. Given the current economic climate and the pessimism about mortgage lending, this prompted me to do some digging to see if our experiences on the front line backed this up.

 

Once you dig into the reports that the Halifax have been putting out, it does seem that the BBC (who brought the story to my attention (http://www.bbc.co.uk/news/uk-18839255)) were guilty of a little bit of headline seeking – Housing is only really at its most affordable in Scotland. However it’s Halifax’s methodology, and overall subsequent findings, that seem most worth of attention. They worked on the premise that buyers would be looking to borrow up to four times their income and so multiplied the average earnings of a Local Authority area by the average house price in the same area. This showed that, of the areas surveyed, “54% were deemed to be affordable” which “was the highest figure since 2002.” So this all sounds very lovely but even more interesting was the news from the Halifax that “Mortgage payments for a new borrower remain significantly below the long-term average as a proportion of disposable earnings.” (http://www.lloydsbankinggroup.com/media1/press_releases/2012_press_release_brands/halifax/0507_HPI.asp) Not only do houses seem to be more affordable but the proportional cost of paying for a mortgage seems to have dropped as well in real terms. When combined by news of rising rents (http://www.propertydrum.com/articles/20120415_4), it looks like we could be set for a return to a buoyant housing market.

 

But is this borne out in the open market? While we saw a rise in viewings and sales in March and April (probably attributable to the change in stamp duty), things have stayed fairly uninspiring. The total number of viewings we’ve conducted have stayed constant over the last few months and, while the percentage of viewings that lead to sales has increased, this isn’t very helpful as the number of viewings is down on what it should be at this time of year. So while Halifax’s news is probably good news, we’re not seeing the effects on the market yet.