A tale of two Britains: housing boom deepens social divide

Buyers want bigger homes outside urban areas, driving prices up as economy limps


CLAIRE Tomlinson dreams of buying a three-bedroom house in the leafy northern English town of Sandbach, but now finds herself priced out of the market - a story that is becoming all too familiar in Britain in the pandemic era.

The 28-year-old e-commerce worker and her partner were saving diligently while renting in Sandbach, so they could buy their own home this year, an ambition that has been thwarted by forces beyond their control.

A post-lockdown stampede for bigger houses outside of urban areas in the new work-from-home age has sparked a fresh boom in Britain's housing market - especially in areas like Sandbach, a small country town surrounded by the rolling Cheshire Plains.

While this dash for the countryside is not a phenomenon unique to Britain, its decision to suspend taxes on residential property purchases till April 2021 has turbocharged the market.

Now house prices have risen to record highs, some 3 to 4 per cent above their pre-pandemic level - a stark contrast to the battered economy, which may be on course for its biggest annual contraction in around 100 years.

The housing market has been one of the starkest manifestations of social and wealth inequality in Britain for many years, and first-time buyers like Ms Tomlinson are already facing a daunting task to haul themselves onto the property ladder.

Now, the intensifying competition and rising prices during the pandemic, which coincide with an imminent reduction in a longstanding state support scheme for first-time buyers, make it all but impossible for many people to afford to own their home.

Ms Tomlinson said: "It's so disappointing. You try to follow the advice, be financially responsible and save enough money for a deposit. But when you actually try to buy somewhere, you realise the system is broken."

Last week, property website Rightmove said average asking prices for homes with three or four bedrooms hit a record high across Britain last month.

Tim Bannister, Rightmove's director of property data, said: "Needing more space has always been the most popular reason for moving house, but now there's a new urgency for extra space to be able to work from home. Buyers are competing for the same type of property."

Britain's housing market has long been a story of winners and losers. Now the coronavirus pandemic is likely to deepen the sector's role as a driver of inequality.

The rate of home ownership among those aged 25 to 34 has fallen sharply over the last few decades, from 67 per cent in 1991 to around 40 per cent today, says government data.

Six years ago, Britain sought to boost home ownership via the state-backed equity loan programme called Help to Buy, for newly-built houses worth up to £600,000 (S$1.04 million.)

Ms Tomlinson had looked seriously at using Help to Buy, but found that the scheme was due to be scaled back significantly next March, when the £600,000 price cap will be cut to £224,400 for north-west England.

Since the average price of a new-build house in Cheshire East stands at around £330,000, the chances of finding a home in Sandbach eligible for the scaled-back support looked slim.

As it stands, homebuyers are increasingly likely to come from already well-off families. Recent research from insurance company Legal & General showed 33 per cent of Britons who are likely to buy a house in the next five years plan to do so with their parents' financial backing, up from 19 per cent last year.

Neil Wilson, chief executive at Legal & General, said this was a "symptom of our broken housing market".

"Unfortunately, we don't have the luxury of relying on wealthy parents to help us buy a house," Ms Tomlinson said.

Property website Zoopla said the share of homes purchased by first-time buyers fell in September for the first time in five years, probably reflecting how lenders started to withdraw high"loan-to-value" mortgage products, which require lower deposits, in early June.

The outlook for the housing market next year is tough to predict, given the vast uncertainties surrounding Covid-19. But a surge in unemployment is clearly underway. Britain's official jobless rate rose slightly to 4.1 per cent in the three months to the end of July; the Bank of England has forecast it will hit 7.5 per cent by year's end after furloughs end.

Previous spikes in joblessness during the early 90s and then the financial crisis prompted hefty drops in house prices, and there is little reason to think it will be a different story this time round.

Bank of America pencilled in a 7 per cent drop in house prices next year; a Reuters poll published on Tuesday showed analysts expected this year's rise to turn into stagnation of prices in 2021.

However, a fall or a levelling out of house prices would not necessarily make for a more equal and accessible market. Many workers in the food, accommodation and cultural sectors are likely to be left unemployed soon - industries that are more likely to hire younger people on lower wages, many of whom are already struggling to buy a house.

For now, prospective homebuyers like Ms Tomlinson face a long wait to buy their own home. "It looks like we'll be renting for some time to come," she said. REUTERS


BT is now on Telegram!

For daily updates on weekdays and specially selected content for the weekend. Subscribe to t.me/BizTimes