Claire Tomlinson dreams of buying a three-bedroom house in the leafy northern English town of Sandbach but now finds herself priced out of the market, a story that is becoming all too familiar in Britain in the pandemic era.
The 28-year-old e-commerce worker and her partner were saving diligently while renting in Sandbach so they could buy their own home this year, an ambition that has been thwarted by forces beyond their control.
A post-lockdown stampede for bigger houses outside of urban areas in the new work-from-home age has sparked a fresh boom in Britain’s housing market – especially in areas like Sandbach, a small country town surrounded by the rolling Cheshire Plains.
While this dash for the countryside is not a phenomenon unique to Britain, its decision to suspend taxes on residential property purchases till April 2021 has turbocharged the market.
Now house prices have risen to record highs, some 3-4% above their pre-pandemic level – a stark contrast to the battered economy which may be on course for its biggest annual contraction in around 100 years.
The housing market has been one of the starkest manifestations of social and wealth inequality in Britain for many years, and first-time buyers like Tomlinson already faced a daunting task to haul themselves onto the property ladder.
Now, the intensifying competition and rising prices during the pandemic, which coincide with an imminent reduction in a longstanding state support scheme for first-time buyers, make it all but impossible for many people to afford to own their home.
“It’s so disappointing,” said Tomlinson.
“You try to follow the advice, be financially responsible and save enough money for a deposit. But when you actually try to buy somewhere, you realise the system is broken.”
Last week property website Rightmove said average asking prices for homes with three or four bedrooms hit a record high across Britain during September.
“Needing more space has always been the most popular reason for moving house, but now there’s a new urgency for extra space to be able to work from home,” said Tim Bannister, Rightmove’s director of property data.
“Buyers (are) competing for the same type of property.”
Britain’s housing market has long been a story of winners and losers. Now the coronavirus pandemic is likely to deepen the sector’s role as a driver of inequality.
The rate of home ownership among people aged 25 to 34 has fallen sharply over the last few decades, from 67% in 1991 to around 40% today, according to government data.
Six years ago, Britain sought to boost home ownership via the state-backed equity loan programme, called Help to Buy, for newly built houses worth up to 600,000 pounds ($770,000).
Tomlinson looked seriously at using Help to Buy, but found that the scheme was due to be scaled back significantly next March, when the 600,000-pound price cap will be cut to just 224,400 pounds for the northwest of England.
Since the average price of a new-build house in Cheshire East stands at around 330,000 pounds, the chances of finding a home in Sandbach eligible for the scaled-back support looked slim.
As it stands, homebuyers are increasingly likely to come from already well-off families.
Recent research from insurance company Legal and General showed 33% of Britons who are likely to buy a house in the next five years plan to do so with their parents’ financial backing – up from 19% in 2019.
Neil Wilson, chief executive at Legal and General, said this was a “symptom of our broken housing market”.
“Unfortunately, we don’t have the luxury of relying on wealthy parents to help buy a house,” Tomlinson said.
Property website Zoopla said the share of homes purchased by first-time buyers fell in September for the first time in five years, probably reflecting how lenders started to withdraw high “loan-to-value” mortgage products, which require lower deposits, in early June.
The outlook for the housing market next year is tough to predict, given the vast uncertainties surrounding COVID-19.
But a surge in unemployment is clearly underway. Britain’s official jobless rate rose slightly to 4.1% in the three months to the end of July, and the Bank of England has forecast it will hit 7.5% by the end of this year after furloughs are ended.
Previous spikes in joblessness during the early 1990s and then the financial crisis prompted hefty drops in house prices, and there is little reason to think it will be a different story this time round.
Bank of America pencilled in a 7% drop in house prices next year while a NYK DAILY poll published on Tuesday showed analysts expected this year’s rise to turn into stagnation of prices in 2021.
However, a fall or a levelling out of house prices would not necessarily make for a more equal and accessible market.
Many workers in the food, accommodation and cultural sectors are likely to be left unemployed soon – industries that are more likely to hire younger people on lower wages, many of who already struggled to buy a house.
For now, prospective homebuyers like Tomlinson face a long wait to buy their own home.
“It looks like we’ll be renting for some time to come,” she said.