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The average home in the UK changes hands every 23 years and while this may seem not very often it is almost three times longer than in the 1980s, new research shows. The low housing turnover is driven by people buying their first homes later, a larger private rented sector and the baby boomer ‘hoarding effect’, according to the annual report from the Intermediary Mortgage Lenders Association (IMLA). The report, which examines trends in the mortgage and housing markets in order to assess the strength of the post-recession recovery, also shows that annual turnover of the private housing stock fell from over 12% to 4.5% over the last three decades. As a result, IMLA’s analysis indicates the average home currently changes hands once every 23 years compared with every eight years during the 1980s. The IMLA report argues that low housing turnover is driven by a combination of people buying their first homes later; by a larger private rented sector where turnover is lower; and by the baby boomer ‘hoarding effect’ where middle aged home owners are staying put, tying up a large part of the housing stock. These factors are likely to keep turnover down for the foreseeable future, potentially limiting mortgage lending and restricting access to existing properties. IMLA’s analysis also shows the estimated contribution of mortgage finance to the total value of UK housing transactions hit a new all-time low of 41.7% last year. It means just £4.17 of every £10 spent on house purchases in 2014 was funded by mortgages while cash or equity made up £5.83 or 58.3%. Despite forecasting a slight increase in gross mortgage lending over the next two years, the IMLA expects the estimated contribution of cash, including deposits and cash purchases, to housing transactions will exceed 60% for the first time on record by 2016. ‘These figures paint a picture of a housing market where turnover has drastically slowed in the last thirty years. Quite simply, in the absence of a sustained rise in housebuilding and improved affordability and turnover, the fact that properties are coming onto the market less frequently severely limits the scope for would-be first time buyers to graduate to owning their own homes,’ said Peter Williams, IMLA executive director. ‘Inertia in the property market spells danger for future owner-occupation levels, and the growing influence of cash and equity is sowing the seeds of a permanent social divide. Having said that, we will see some continued growth in mortgage lending and as the market stabilises and wages rise, we may also start to see affordability improving,’ he added. The report also assesses how the mortgage market recovery has been tempered in the last year by worsened housing affordability and tighter lending restrictions since April’s implementation of the Mortgage Market Review (MMR) and October’s macro-prudential changes prompted by the Financial Policy Committee (FPC). While gross mortgage lending was running 36% up year on year in January 2014, it was… Continue reading →
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