Among George Osborne’s most recent pledges on the economy was that it has “turned a corner”. It’s a great soundbite; managing to clearly get his point across with enough brevity for it to be included in the next morning’s headlines. It also shows that Osborne is willing to admit that whilst the economy is building, but is certainly not out of the woods just yet.
There is, of course, a long way to go before reaching the financial stability enjoyed before the crash, but figures are at least now on an upward trajectory. With this considered, it’s worth paying attention to one of the biggest sole indicators for financial stability – the housing market.
First, it’s worth noting that the housing market didn’t quite follow the same trajectory as the overall economy, with it not being until 2010 before sliding into the doldrums. This, as has been widely reported, followed some of the strongest growth ever seen, with !05 per cent mortgages and easy access to finance creating a thriving property bubble. Then, banks collapsed, belts were tightened and lending was reined in.
With the finance rug having been swept out from under the feet of prospective buyers, however, demand slumped prices inevitably followed. During this period, only those who could find 40 per cent of their new property value were seen by banks as having a reliable enough status to be awarded a mortgage.
In the years that followed, much of the housing market remained largely unchanged. Property prices stagnated around the UK (except for London where they continued their relentless march upward) and finance remained out of reach for many. The so-called ‘lettings boom’ was in full stead.
Then, in his 2012 Budget, Osborne announced his ‘Help to Buy’ scheme, which – despite initial concerns regarding second homes – has been hailed as a resounding success.
Fast forward to 2013 and the economy has “turned a corner”. George Osborne – typically less pugnacious than Ed Balls – has appeared in decidedly more bullish mood. His status as the “part time Chancellor”, which was proffered when fiscal reports were amended downward following hefty cuts, seems to be all but forgotten.
So where does this leave the economy? The “turning of a corner” was attributed to GDP growing by 0.7 per cent in Q2 2013, after figures had already been revised up from their new year estimates. In turn, the year-end estimates almost doubled from 0.8 per cent growth to 1.5 per cent.
Where the housing market is concerned, this suggests good news for estate agency personnel, as it could mean a return to the buyer’s market conditions of old. That being said, it will take a long time before the millions of people now in the private rented sector move themselves into owner-occupancy.
Now, prices are increasing much more steadily and finance is more readily available – not just through Help to Buy but also through less heavy deposit requirements.
So the UK economy has turned a corner, but is it out of the woods? Time will surely tell.