Reality check: housing market still out of reach

For the first time since 2009, the average price of housing in Norwich decreased for three consecutive months. It is a relief for prospective buyers that the annual price increase is slowing down. Yet, one question remains: will it slow down enough?

Between December 2015 and October 2016, the price of housing in Norwich went up by 9.2 percent, considerably more than the 5.7 percent increase nationally. So, the falls of 0.3 percent in March, 0.4 percent in April and 0.2 percent in May 2017 caused by banks’ new affordability tests and other factors were welcome.

Indeed, Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said that, “the days of surging house prices driven by sharply rising loan-to-income ratios are gone.” He predicted that the housing prices increase would likely stabilize at around 2 percent for 2017.

However, an increase of 2 percent may still make it impossible for many to buy a house. National inflation is overtaking wages. Inflation went from 2 percent in September 2016 to 3.5 percent in April 2017, the highest rate since April 2012.

If prices go down enough, the demand will increase sharply due to the large number of prospective buyers who are waiting for the price to drop. This would chase the prices right back up. Itís a vicious circle.

This makes it difficult for people with debt, especially recent graduates. The debt to income ratio can make them ineligible to take out a mortgage.

They are consequently forced into either renting, which hampers saving money, or joining the 32 percent of graduates moving back in with parents – a figure which was only 20 percent in 1960. And letís face it, neither are desirable choices.

There is still hope, however. The New Anglia Local Enterprise Partnership (LEP) pledged to build 117 000 new homes in Norfolk and Suffolk before 2026. Whilst this means we have a long time to wait, this action could resolve Norwich’s housing crisis.

So until then, we can only wait to see what happens next. As Sowersby’s estate manager Jonathan Wood said, the market with Brexit is uncertain. Until the negotiations of Article 50 are concluded, housing prices may change unexpectedly.


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Elkyn Ernst

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November 2021
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