The Brief: UK housing demand fell in October for the sixth consecutive month, according to The Royal Institution of Chartered Surveyors. The group’s New Buyer Inquiries Index indicated a -55% drop last month from -36% in September. This is the lowest reading since the 2008 financial crisis (excluding the months affected by the pandemic).
Why It Matters: The decline in property demand may be sustained in the coming months as UK wage growth and hiring activity both plunged in October, according to KPMG and the Recruitment and Employment Confederation (REC). The employment index by REC dropped to 45, which indicates fewer vacancies in the job market. Pay to new staff increased but is at its slowest in 1.5 years. KPMG UK blames the looming recession as the reason behind the deceleration in pay pressure.
Finanze Foresights: UK home affordability has been at a record low since last year. According to the ONS, full-time employees in England need to spend 9.1x their annual earnings to purchase a home. But this still reflects the previously surging property prices in the country. The March 2023 report will differ, however, due to the drop in property prices that is expected to continue next year. Unfortunately we don’t expect this to make much of a difference to affordability though. Prospective first-time buyers still need a huge increase in their wages if they want to purchase a property and will need to settle for high borrowing costs. Zoopla estimates that a typical buyer needs a £12,250 increase in income to qualify for a 4% mortgage - but this was based on a calculation made in August. So, with inflation still high and adjusting for mortgages with rates above 6%, getting such a pay increase may be challenging given the wage growth trend reported by KPMG.
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