Why is the housing market still buoyant?
Here's a conundrum. Property prices bounced back in January rising by 1.4 per cent during the month, according to the Halifax Building Society. Yet first time buyers are at a record low - 10 per cent down on 2004 and 40 per cent down on 2002 - so how can the market be so healthy? And it's not just a one month event. The Bank of England has announced that in December the number of mortgage approvals for house purchases reached a 19 month high.
Traditionally movement in the market has been driven by first time buyers. Most purchases involved a chain which snaked its way down to a first time buyer. Although buy-to-let purchases can drive up the mortgage statistics they do not fuel chains and that market sector is anyway in the doldrums. So what is going on?
It is hard to find the direct evidence but there is certainly anectodal evidence to suggest that we have for the first time reached the point where significant numbers of home owners are downsizing. The statistics are pretty amazing. Pensioners in the UK own property worth in excess of £1trillion - and many of them are choosing to cash in some of the value of their homes and move to somewhere smaller and more manageable (and possibly a property abroad or helping their children onto [or up] the property ladder).
In downsizing they are creating both demand (by buying properties from those look to move up the chain) and opportunity (by freeing up larger property at the higher levels of the market).
It would be good to see some stastics on this - but they are unlikely to come from the mortgage providers as most of these downsizers will have paid off mortgages and will not require them to buy their new properties.