Homeowners and property developers were given encouraging signs recently that the UK’s housing market was recovering. Whilst this remains to be the case in respect to increased mortgage lending and a quarterly increase in national average house prices, there are concerns over what this actually means for the market.
It is all too easy for property owners to look at these signs with unjustified optimism. The UK is only just beginning to emerge from a deep and damaging recession that hit most of the country by surprise.
Although inflation is no longer suffering a negative trend, the consumer price index does not tell the whole story and it is clear with rising unemployment and corporate closures the UK is not yet out of the woods – at least not economically speaking. Thus, recent improvements in the housing market, which may prompt more homeowners to resume investing in their homes, could prove to be misleading in practical terms.
The Ernst & Young Item Club supports this fear by claiming, despite the promising signs of late, property values will take at least another five years to return to their 2007 peaks. In fact, the Item Club has attributed the recent increase of mortgage lending and average house prices to a small percentage of wealthy buyers. More specifically, buyers whose cash wealth is considerably higher than the credit health of average buyers. If the market is being stimulated by a select number of cash happy new homeowners, it is reasonable to suggest that house prices and mortgage lending might slip during the next quarter. Nevertheless, homeowners are advised to push on with substantial home improvement plans in order to invest in the future.
According to a recent survey by the loan company AA Personal home improvement loans are still proving popular in the face of the recession. The study shows that in spite of the current economic crisis, loans for improving peoples’ homes are still being snapped up by UK home owners. Statistics from the research reveal that approximately a quarter of all UK properties will have some home improvement work undertaken during the recession and almost a quarter of these improvements will add an additional room on to the layout of a person’s home.
According to the editor of the Estate Agent Times, Mark Burgess, most people wouldn’t expect loans to be popular right now, least of all loans for home improvement. However, he also has stressed that by carrying out certain types of work a lot of value can be added to a property and he used additional rooms as an example, especially reception rooms.
The focus is on home improvement rather than selling right now as house prices are far lower than they were last year and people are reluctant to sell at a loss. When the people in the AA Personal study were asked what their reason was for choosing to improve their homes, 57 percent of the respondents said it was to create a better space in which to live. Half as many people in the survey answered that they were carrying out work in order to make their home worth more money.
Those surveyed in the North of England were especially positive about adding rooms to their homes and nearly half of all respondents from Leeds who were carrying out home improvement work said that they intended to add another bedroom. Large numbers of those living in Liverpool also wanted to add more space to sleep in, with 45% of respondents in Liverpool and 28% in Manchester admitting to carrying out home improvement work for the same reason. Down South, however, many respondents to the survey cited new space in which to entertain guests as the reason for home improvement work.