Steves Blog

Housing - return of the bubble?

30 November 2013

In 2013, a further 60,000 property owners joined the £1M+ club, bringing the total across the UK to more than 393,000 of which 61% are in London. With the Government’s Help to Buy scheme approvals for new mortgages are soaring as people race to jump on the property market. But is it sustainable?

In 2013, a further 60,000 property owners joined the £1M+ club, bringing the total across the UK to more than 393,000 of which 61% are in London. With the Government’s Help to Buy scheme approvals for new mortgages are soaring as people race to jump on the property market. But is it sustainable?

The Government's decision to hold interest rates at an all time low is driven by the perceived need to prop up the housing market, however, this has resulted in a housing boom in the south east and other sought after areas across the UK. With the average UK mortgage at £100,000 an increase in interest rates at this time would have a far-reaching impact, particularly on those new to the housing market with mortgages far in excess of a £100k. A single percentage point increase would see an additional £1000 a year in interest on the average mortgage. Those who have maxed out on the Help to Buy scheme will have mortgages in excess of £500k, a single percentage point increase on this level of debt would be catastrophic with interest payments increasing by more than £400 per month. This would clearly figure highly in future political debates, particularly in light of the recent furore over utility bills increasing by £170 per annum, which is modest by comparison.

The solution apparently is to build more housing stock, so CPC has focused on how we can support developers keen to invest in residential schemes. We secured our first major scheme in 2012 in Edinburgh and throughout 2013 our success in this area has snowballed with schemes in a number of major cities and towns across the UK. Our strategy was further realised with the acquisition of Anser project mangers that brought long term clients in the shape of British Land and Taylor Wimpey, as well as a number of niche private developers. To this end we have significantly grown our private sector business and it now represents 15% of CPC’s turnover.

The question is how long will this current property boom last? My view is that developers have two to three years to make hay. Those that stay in for longer may well be victims of another collapse.

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