Low unemployment figures could stop the housing market from falling into a recession, according to a fund manager at Crux.
The number of unemployed people is of more consequence to the housing market than higher interest rates, and with jobless numbers continuing to be low, the housing market should avoid a major downturn over the next year, according to Richard Penny, UK equity fund manager at Crux.
Penny noted that UK house builder shares are down around 25 per cent this year, as the market has begun to price in negative impacts from slower growth, higher inflation and higher interest rates.
But he said: “Unemployment probably matters more for housing affordability than short term interest rates.
"And the desire among people to move house remains strong, not that many transactions are being cancelled in the current market conditions, people still have that desire to move out of urban areas, so there remains pent up demand in the market.”
He has responded to this by buying some shares in companies related to the housing sector.
Penny said that while the UK stock economy will experience headwinds as a result of inflation next year, he does not anticipate this being particularly worse in the UK than elsewhere in the developed world, and anticipates the housing market will remain “strong.”
Sarah Coles, personal finance analyst at Hargreaves Lansdown, is a little more sanguine on the outlook for the market.
She said banks are expecting to make it more difficult for people get mortgages over the coming year due to higher interest rates and the fact inflation makes debt repayment both more expensive and also less affordable as the proportion of an individuals income going to other things will be higher.
In addition, higher interest rates push up the yield banks can attain from buying government bonds and so make the returns they can achieve from mortgage lending seem relatively less attractive, she said.
david.thorpe@ft.com
