Impact of Falling Employment on The United Kingdom Housing Market
Saturday, July 11th, 2009 Subscribe To Our Feed
Unemployment nearing the levels forecast in the present recession is sufficient to act as a brake on the much awaited bounce-back in UK Residential Property values. With redundancies lagging behind the recession and likely to grow well into 2010 it seems likely that this effect of the recession will put the brakes on a quick return to earlier Residential Property values. Indeed 2007 levels of Residential Property prices may well not be seen again for several years. Additionally, unless you use the services of a “Sell House Fast” Firm, the chances of achieving a Quick Property Sale are also significantly reduced.
A rise in unemployment has two effects on Residential Property values; working through simple supply and demand principles to restrict price growth.
The most immediate effect is through the loss of would be purchasers or Residential Property movers. Obviously would be purchasers who lose their income are virtually certain to be excluded from the market, and will have to put off any house move until they are back in work. Even in boom times useful mortgage finance is not available to the unemployed. There can, though be a subtle effect which influences this main effect. Some house owners who find themselves out of work at an age close to retirement; may decide to bring forward retirement plans on the assumption that they might not get back into a job even when the economy starts to improve. These people are likely to have little or no mortgage and might well choose to sell their current house and trade down to something smaller in readiness for retirement. This will have a slightly positive effect on values at the lower end of the market, and should increase the chances of a Quick Home Sale within that end of the market, but it will bring in more supply at the mid to high end of the market. This will depress values in that segment, and will frustrate anybody in that segment looking to Sell Property Fast.
A longer term effect of unemployment is the introduction into the market of distressed house sales or repossessed property. Most house owners will cling on to homes as long as they are able but may be pushed into selling if unemployment continues
long term. On facing redundancy, some home owners will opt to “Sell my House fast”. On the other hand they might see the matter taken out of their hands by their lender who might decide to repossess and sell the house on the open market. It’s, nevertheless, worth bearing in mind that lenders are currently extending arrangements with home owners who are behind with payments in an attempt to cut down repossessions. This is encouraged by the government who have brought in a two year payment holiday scheme with certain lenders. This will avoid repossession in most cases. So repossessions are likely to be less than in previous recessions and could well be pushed further into the future.
Taken overall, the effect of unemployment on the market looks likely to be less than in previous recessions and also lagged further, so we may see less impact in the short term but a lingering effect over the next two to four years.
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