It would be reasonable to think that the ceiling is close - Comment on the BoE Money & Credit figures for February from Richard Pike at Phoebus Software

29 March 2021

Richard Pike, Phoebus Software sales and marketing director, says “The housing market, fuelled by government incentives, continues to move at a pace. With competition from buyers increasing it really is a seller’s market. This demand is naturally pushing house prices up in most areas, only the capital has seen prices falling as buyers look to escape city life following the pandemic, but the question has to be how much more can prices increase?

“With the ONS reporting that buyers may need to spend 7.8 times their annual earnings to buy a house in England, and 5.9 times in Wales, the question of long-term affordability raises its head again, at the same time as we are seeing more high LTV products coming to market. Surprisingly, the same report said that average earnings growth in 2020 outpaced house price growth in 60 per cent of districts. So it will be interesting to see how much more demand will push prices upwards. It would be reasonable to think that the ceiling is close and to expect to see house prices level off. However, it is likely to be the second half of the year, when stamp duty returns to normal, arrears levels start to increase and schemes such as furlough are withdrawn, that we will see the true effect on the housing market.”