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Beware the stats: the property boom cannot last

House prices are surging, with annual growth hitting 7.3pc this September. Yet the boom is completely out of kilter with the current recession and analysts are warning it cannot last.

With a looming second lockdown threatening to contain Britons once again and the stamp duty holiday coming to an end in March, people are desperate to move. Lockdown has forced many to reassess their living arrangements and highlighted the need for more space.

Although further restrictions risk leaving millions unemployed and unable to repay their mortgage, so far they have only added fuel to this fire to move house, as our property editor Isabelle Fraser writes. This will increase competition and push up sales values: one in seven properties is selling for higher than asking price. This will mean further to fall when the economic fallout hits home.

Bidding wars are bad news for cash-strapped first-time buyers. They have already been punished by banks withdrawing loans for people with small deposits. Now ministers are wading in, as Boris Johnson announced this week he wants to turn “Generation Rent into Generation Buy”.

His master plan? To get banks to offer long-term, fixed-rate mortgages of up to 95pc, allowing young people to get on the ladder with just a 5pc deposit. It sounds great, in theory. But on closer inspection, there are some large holes in the scheme.

It will mean overturning requirements placed on lenders in the wake of the 2008 credit crunch that have meant they cannot offer loans considered to be particularly risky. The Government has suggested getting round this by using taxpayer funds to guarantee the loans.

However, many taxpayers have had enough of their money being used to back loans that may never be paid back during this crisis. There is also the concern that homeowners will fall into negative equity, when the price of a property falls below the amount borrowed to buy it. Not to mention the cladding crisis, which will cripple the market if it is not solved quickly.

But for renters stuck in cramped homes, any way out may seem like a better option – even if it means chaining yourself to mortgage repayments for years to come.

As for landlords, they too seem unafraid of the jobs crisis that could push their renters out of work when furlough comes to an end this month. Battered by tax hikes in recent years, many have jumped on the chance to expand their property portfolio while they can save on stamp duty. (Find out other ways property owners can save on tax here).

But they should be careful about where they invest their money. Want to know where to buy a property in the most stable rental markets in the country? Find out the best locations if you have a deposit of 25,000, 40,000 or 60,000.

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