Open any of the free newspapers that littered tube carriages last week and you will have noticed a sudden glut of colourful no-expense-spared ads. Out-of-town developments – Ashford, Crayford, Thurrock – promising mortgages from as little as £364 a month, with only 5% deposit.
Despite its no-turning-back rhetoric, the UK government is actually introducing many of the kickstart measures for which critics of austerity have been clamouring (according to an article on the Guardian website: Osborne Turns To Keynes). Chief among them are the Help-to-Buy guarantees – which aforementioned developers have been lightning-quick to exploit.
Just like the real spring, the long-awaited ‘green shoots’ of recovery have stubbornly failed to materialise, and it has seemed that the UK economy was set for permafrost stagnation. However, as has often been the case in the past, it appears to be that where the housing market goes, the rest of the economy may be set to follow. The sudden injection of government-backed credit will offer the buoyancy and confidence needed to re-float other moribund sectors.
Potential buyers, frustrated by the banks for so long, will not only be looking at new-build – they will also be buying older properties in towns and suburbs, and this is certain to help unblock chains, building momentum across the market and reviving all manner of trades, services and businesses. Again, history is set to repeat itself with the South East taking the lead, though it is to be hoped that with initiatives like the Heseltine Growth Fund there is real intent to finally bring growth and rebalancing to other regional economies too.
Although some analysts will warn of a housing bubble, this is less likely when you look at the whole picture and the history of UK house prices.
Jean-Paul Rodrigue’s graph ‘Lifecycle of a Bubble‘ (http://www.housepricecrash.co.uk/graphs-bubble-lifecycle.php) illustrates this beautifully:
At the moment, the economy is in an extremely fragile place: it hasn’t had a hernia, it’s had a triple-heart bypass, and it isn’t about to start training for a triathlon. Confidence will remain on the low side for a long time but movement in the housing market will start a gentle recuperation and with low interest rates in the medium-term, property prices will steadily swell.
All in all, 2013 looks like being the year that, thanks to an invigorated housing market, the UK economy will (like our hedgehogs and grass snakes) finally emerge from its much-longer-than-expected hibernation … blinking gratefully, half-believing it’s not real.