Assetz chief warns of “dangerous” property market dynamic
Stuart Law, chief executive of the Assetz Group, has warned of a “dangerous dynamic” for the property market, as house prices continue to rise along with the cost of living.
According to the latest house price index from the Office for National Statistics, house prices grew at a far quicker pace than expected last year.
In December, house prices grew by 0.8 per cent, month-on-month, which implies an annual growth rate of 10.8 per cent, year-on-year. This is above the consensus estimate of 9.4 per cent.
Meanwhile, inflation rose to 5.5 per cent in January, up from 5.4 per cent in December, with some analysts predicting that the cost of living could rise by up to 10 per cent this year.
“House prices are still on the rise while wages fail to keep pace with inflation,” said Law.
“This is a dangerous dynamic for the market and particularly worrying for low income and first-time buyers.”
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Law predicted that the Bank of England will keep interest rate growth “cautious” this year, in order to allow low-cost mortgages to fuel market activity. But he warned that this cannot continue indefinitely.
“If current dynamics persist, we will see more and more people locked out of the housing market unless we urgently tackle chronic undersupply,” he said.
Law added that small- and medium-sized enterprise (SME) housebuilders are also coming under pressure due to upcoming planning reform and high build costs. This could delay the production of new homes, making it harder to meet the government’s goal of building 300,000 new houses per year, and keeping property prices high due to undersupply.
“We need to make sure that developers can navigate current cost pressures by gaining access to a broad range of financial products that meet their needs,” Law said.
“This goes beyond bank funding and includes peer to peer lending and other specialist finance providers who bring billions in funding to the market each year, creating bespoke solutions that aren’t on offer from traditional lenders.
“Specialist finance is essential to support housebuilding, which is why we’re boosting our SME housebuilder lending to £1bn in 2022.”
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