Our ‘Market Insights’ is a series of ongoing research to investigate key trends and structural changes in UK housing markets. This latest research, undertaken by Yolande Barnes Consulting (YBC), looks at the changing relationship between prime and mainstream market behaviours with some key findings shown below:
– In a complete turnaround from 20 years ago, 55% of UK owner-occupiers now own their property outright, without a mortgage. In 2000 this figure was 41%.
– The geographical distribution of equity-rich households (the ‘equity haves’) is very different to that of households reliant on mortgage debt (the ‘equity have-nots’):
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- Housing equity is concentrated in select rural, coastal and scenic areas which offer quality of life without the ties of regular contact or commuting to employment centres.
- Mortgage lending is heavily linked to workplaces and commuting patterns. Even after Covid, mortgagors still seem to be tied to the workplace and their source of income.
– In areas with high levels of housing equity, significant proportions of the housing market have very little or no reliance on borrowing. Increasingly, these areas behave less like ‘mainstream’ markets; the driving factors of house price growth in these areas are more like those which have governed prime housing markets over the past few decades:
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- Factors including the opportunity cost of capital, availability of equity and sentiment of cash buyers, which used to be drivers only of prime markets, are now prevalent in the equity-rich mainstream marketsEquity-rich owners are like prime owners in having much more discretion in buying and selling behaviour. In the event of recession, these markets are less likely to be supplied by forced sales due to debt. Supply may be much more restricted as a result and sellers more likely to withdraw from weak markets. This means that recession is less likely to produce price falls on the same scale as mortgage-reliant, mainstream markets but more likely to result in significantly lower levels of turnover.
- Just as prime London has behaved differently from the rest of the country in the past, so the ‘new prime’ places with behave differently from the mortgaged markets in future. The divergence of experiences between the ‘equity haves’ (EH) and ‘equity have nots’ (EHN) will be a major headache for policy makers and planners and an important consideration for any housing market participant, including buyers.
- Buying opportunities as well as price performance may be very different between the EH areas and EHN areas in future.
- EHN areas are going to be more exposed to recessionary effects which impact affordability. They are more likely to experience higher levels of repossessions and turnover generally so will be more to be the places that register price falls over the next 2 to 5 years.
- EH areas on the other hand could see more stagnation and less efficient land use. The market will be dependent on investment performance, confidence, and other externalities but may be among the first markets to show grow as the economy recovers.
Managing Director and co-founder, Mark Parkinson, comments: “There have been clear shifts in the way that residential markets generally and prime markets specifically are behaving which pre-date the Covid pandemic. We have commissioned one of the country’s top independent real estate researchers to uncover, unpick and explain these trends because we believe the findings are going to impact our clients’ interests significantly”.
Also featured in The Times
