Unemployment might not influence house prices

In recent months there have been conflicting reports about the UK economy. On one side, experts are pointing to an array of economic indicators i.e. rising house prices and retail sales, suggesting the recession is coming to an end and a recovery is imminent. On the other side, different authorities are suggesting there is still more of a downturn to come, claiming the increase in unemployment will eventually take its toll on the UK, and the property investment market will face a double-dip recession.

The latter suggestion isn’t really as likely to happen, although not impossible. According to Mouseprice.com’s director, it is not possible to say for certain what will happen. He says that if the past is anything to go on, the last indicator is the one that keeps heading downwards when the other indicators start to turnaround.
Some pessimists point to unemployment as something that is still to kick in. This is what some are still worried about, but it still remains to be seen whether this comes about.

 

house prices

The Office for National Statistics stated that 72.7% of people of working age were employed during the three months up to June, which is down 0.9% from the previous quarter. Around 2.43 million people were unemployed, up by 220,000 compared to the beginning of the previous year.

Earlier this week, Bovis Homes mentioned the rising unemployment, saying it was a concerning factor, given the potential impact it may have on property prices. It said that prices are still considerably low, below the levels they were at during the peak of the housing ‘boom’, while the number of transactions are still at record lows. Bovis still remains vigilant regarding short term prices, especially due to the lack of available mortgages at present.

The above mentioned factors, as well as a potential increase in the supply of homes to go on sale in the second-hand market, suggest an encouraging situation for property investors with cash to spend. They could keep prices low for some months to come, meaning there may be opportunities for buyers to snap up some bargain investment property before the virtually inevitable rise in property prices begins.