house prices

House prices experienced rapid growth throughout the pandemic thanks to a combination of stamp duty cuts, low-interest rates and the “race for space.”

But as interest rates started to climb in the second half of 2022, the mood changed.

Rising interest rates and the cost of living crisis are now having a clear impact on the housing market according to the most recent data.

According to Nationwide, in February house prices dropped at their fastest rate since 2012, Meanwhile, HMRC data shows UK property transactions are down by nearly 20% and a survey by the Royal Institution of Chartered Surveyors seems to confirm the market’s bearish sentiment.

And while Rightmove’s house price index is slightly more upbeat, reporting a £3,000 increase in asking prices in March, it’s important to remember asking prices and the price paid by buyers are two very different things.

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Where will house prices go in 2023?

The Office for Budget Responsibility (OBR) published a fresh forecast for the property market alongside the Spring Budget – saying it estimated prices would fall further than previously expected.

The OBR now expects house prices to fall 10% by 2024.

Both Lloyds and Halifax expect house prices to fall 8% in 2023, while Nationwide and online estate agent Zoopla are predicting falls of 5%.

However, Tom Bill, head of UK residential research at Knight Frank, argues: “The first rule for anyone predicting the trajectory of house prices in 2023 should be to ignore any data from the chaotic final quarter of 2022.

“The latest data shows two things are happening at the same time. First, the effect of the mini-Budget is working its way through the system, which means that monthly declines are narrowing. At the same time, an annual fall in house prices appears imminent, underlining how the lending landscape has changed irrespective of the mini-Budget.

“As rates normalise, buyers will increasingly recalculate their financial position and house prices will come under pressure. We expect a 10% decline over the next two years, taking them back to where they were in mid-2021.”

Financial market conditions appear to have settled, and the UK is expected to avoid a recession in 2023 despite previous, more ominous forecasts.

But the headwinds facing the property market are unlikely to abate in the short term, especially following the latest interest rate hike by the Bank of England (BoE).

The BoE raised rates to 4.25% on 23 March, their highest level since 2008. This was “disappointing news to borrowers who are not locked into a fixed rate mortgage, as their monthly repayments may rise in the coming months amid a cost of living crisis”, says Rachel Springall, finance expert at Moneyfactscompare.

“Affordability may well be the key challenge for borrowers struggling with the cost of living crisis, as interest rates are higher than prospective buyers, or those looking to remortgage, were perhaps anticipating,” continues Springall. “Whether now is the right time to get a mortgage will entirely depend on someone’s individual circumstances, so seeking advice is vital.

“In the meantime, it would be wise for borrowers to keep a close eye on the mortgage market, housing supply and house prices, particularly for new buyers who are a critical part of keeping the market moving.”

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division.

Why are house prices falling?

A combination of factors is hanging over the UK housing market.

Record high rents are making it hard for first-time buyers to save for a deposit, especially as they struggle with inflationary pressures and rising bills.

But more importantly, mortgage rates have increased exponentially over the last 12 months. They peaked at around 6.65% after Kwasi Kwarteng’s mini-budget pushed up the cost of borrowing.

They have since come down to below 6%, falling over the last two months. The average two-year fix now stands at 5.6%, while the average five-year deal is 5.4% according to Moneyfacts.

But when you consider the average two-year rate was around 2% at the end of 2021, rates are still much higher than they were.

Higher mortgage rates have driven buyers away from the market, while others have been priced out.

And mortgage rates may have further to go. The bank has made it clear it might have to hike rates further to bring inflation under control.

Even though the OBR expects inflation to fall to 2.9% by the end of the year, the latest data from the Office for National Statistics (ONS) showed the figures moving in the wrong direction. The ONS recorded CPI inflation of 10.4% in February, from 10.1% in January.

“If there were to be evidence of more persistent pressures, then further tightening in monetary policy would be required,” the BoE said.

This suggests the central bank may hike rates further in the months ahead as it tries to get inflation under control, putting further upward pressure on mortgage rates and, as a result, downward pressure on house prices.

By Nicole García Mérida

Source: Money Week

UK house prices rose 6.3% in January over a 12-month period, according to HM Land Registry’s latest monthly house price index.

UK house prices rose 6.3% in January over a 12-month period, according to HM Land Registry’s latest monthly house price index.

This continues the picture of slowed growth, following an annual 9.3% rise in the December figures.

The new average UK house price is recorded as £289,819 in January, which is £17,000 higher than a year ago, but just over £4,000 less than December. This represents a 1.1% decrease between December and January (not seasonally-adjusted), following a 0.4% decrease in December.

This picture varies across the countries, with average house prices rising 6.9% to £310,000 in England, 5.8% to £217,000 in Wales, 1% to £185,000 in Scotland and 10.2% to £175,000 in Northern Ireland.

Of the English regions, the highest annual percentage change was in the North East at 10%, compared to the lowest in London at 3.2%.

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The overall annual decline has been attributed to a fall in average UK house prices in January 2023, compared with a rise in January 2022.

House Buyer Bureau managing director Chris Hodgkinson comments: “We’re now seeing the monthly rate of house price decline seen since September of last year start to accelerate and this demonstrates the increasingly difficult landscape that buyers are negotiating when looking to purchase.

“This reduction in prices is being largely driven by mortgage-backed homebuyers who are no longer able to offer the high asking prices seen during the pandemic boom and are having to adjust their position in the market accordingly.”

Alliance Fund chief executive Iain Crawford says: “It’s certainly a tale of two markets at present, with uncertainty shrouding the existing market and driving a topline month-on-month house price decline, while the new-build market continues to move at a rate of knots.

“The average price of a new-build property increased by 6.7% in January alone, up 22.3% annually, and this demonstrates the continued strength of the new homes sector when compared to the wider market.”

Meanwhile MT Finance is calling for measures to stimulate the market.

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division.

MT Finance director Tomer Aboody says: “The market may benefit from further stimulation, perhaps in the form of the reworking of stamp duty. Banks remain keen to lend and many buyers still want to make a move, so such an impetus may persuade them to take the plunge.”

All eyes are now focused firmly on tomorrow’s Bank of England base rate announcement.

Octane Capital chief executive Jonathan Samuels comments: “The general consensus is that we will see yet another base rate increase tomorrow, albeit a potentially smaller jump than previous hikes, and so the cost of climbing the property ladder looks set to get that little bit more expensive.”

By Linda Ram

Source: Mortgage Finance Gazette

The increase was largely driven by a 1.2 per cent rise in asking prices for four and five bedroom detached homes at the top end of the market.

In spite of the rising cost of mortgages, the average asking of a UK home jumped by almost £3,000 this month. The typical asking price increased by £2,906 to £365,357 in the year to mid-March, according to the latest Rightmove data.

The increase was largely driven by a 1.2 per cent (£7,947) rise in asking prices for four and five bedroom detached homes at the top end of the market.

This is despite many predicting house prices would fall by as much as 10 per cent this year.

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Instead, average asking prices climbed 0.8 per cent over the past month, with Rightmove saying buyer demand was 6 per cent higher than the same period in 2019.

It added first-time buyer and second-stepper homes rose by a modest 0.4 per cent and 0.5 per cent, respectively.

However, the average asking price is still £5,800 below October’s peak, according to the property platform.

Bigger homes are taking longer to sell, the report revealed, possibly driven by the fact that fewer people are making coronavirus pandemic-driven lifestyle changes.

This may be a result of fewer pandemic-driven moves to bigger homes and a more cautious approach to trading up, thanks to the ongoing cost of living crisis.

March traditionally signals the beginning of the busiest time of year for property sales but this month’s price hikes falls short of the average monthly rise of 1 per cent seen in March over the last 20 years.

Nicholas Mendes of mortgage brokers John Charcol said he was not surprised by the price increase but struck a note of caution.

“There’s still a lot of demand out there – the biggest constraint at the moment is there’s not enough property on the market. From spring onwards things start to take off again and confidence is beginning to return, but many sellers are still hesitant. Mortgage rates are coming back down – there are some 4 per cent mortgage deals coming through next week,” he said.

“It’s a small positive but I don’t think we’re going to see an upward price trend throughout the year, it’s going to be more of a rollercoaster with property prices.

“You’ve got to remember the Rightmove data is based on asking prices, not selling prices. I think we’re likely to see prices dip by 8 to 10 per cent in the summer. The US banking sector is not as stable as expected and that filters through to the UK market.”

His caution was echoed by Sarah Coles, head of personal finance at Hargreaves Lansdown.

She said: “Sellers are taking a punt on higher asking prices. They’re hoping falling mortgage rates and the spring selling season will support some fairly optimistic pricing – particularly at the pricier end of the market. Unfortunately, there are a few signs that some of this confidence may be misplaced, and that they may well need to do a deal to secure a sale.”

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division.

“Asking prices remain pretty punchy, up 3 per cent in a year. This has been driven by asking prices for larger properties – which are up 1.2 per cent in a month. However, this end of the market isn’t shifting as fast as it did in the same period in 2019, or as fast as slightly smaller homes. It’s a reasonable indication that they may not quite achieve these prices. This is even more likely when you consider Zoopla’s findings that home sellers are cutting prices by an average of £14,100 – or 4.5 per cent to shift their properties,” she added.

Tim Bannister of Rightmove said the data signalled the return of stability and confidence to the market.

“The pace of the market reached an unsustainable level in the last two years, and was on track to slow to a more normal level, though the speed of this slowdown to more normality was accelerated by the reaction to September’s mini-Budget.

“While higher mortgage rates and economic headwinds raise challenges, many potential home movers who were effectively side-lined in the frenetic bidding wars of the last two years will find that a slower-paced market gives them time to plan and secure their next move as we enter the traditionally busy spring buying season.”

By Eve McGowan

Source: i News

Home is where the heart is. It is also one of the most pressing issues in the UK right now. House prices have been rising unchecked for decades.

Meanwhile, there aren’t enough to buy and a significant proportion don’t meet the standards of quality laid out by the government. But while the UK housing crisis is high on the political agenda, it’s often misunderstood. The Centre for Cities, a think tank, reckons that Britain isn’t dealing with a single crisis, but lots of localised ones, with each densely populated area in the midst of its own shortage.

Against this backdrop is the ever-scaling landscape of proptech, the raft of companies that offer digital solutions to processes applying to property and real estate. In Europe, these brands have been thriving, reaching 45 per cent average annual growth in investment between 2014 and 2019, according to PriceHubble. It’s ramping up in the UK too – in 2021, investment reached a record £1.6 billion, a figure that quadrupled from the year before, according to VC firm Pi Labs. The burning question then, is this: will this wellspring of innovation help to alleviate the sector’s biggest problem?

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Bottom rung boosters

At this stage, I’m prepared to think it might. The average house in England costs nine times over the average salary (it was 3.5 times in 1997), the Investors Chronicle reports. So affordability is a major issue impacting the economics of the housing crisis. The spiralling price of property has encouraged entrepreneurs from proptech and fintech to come up with solutions that make ascending the first rung of the housing ladder more realistic. That means getting a mortgage agreed.

Haysto is one company making this possible for people. While major banks usually turn away those with bad credit, who are self-employed or who haven’t earned consistently, Haysto connects customers to specialist lenders who are more lenient.

Generation Home is another scale up that is trying to clear the path to homeownership. It offers products such as a ‘deposit booster’, an interest-free loan intended to beef up the amount of capital buyers have to put toward a down payment. Kettel Homes offers a similar service, but defines it as a rent-to-own system. This involves the company buying you a house and letting you rent until you’re in a position to buy.

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division.

Getting things moving

The housing market is famously resistant to innovation. That means things happen in the same way they always have – slowly. A number of proptech players in Europe are creating methods designed to speed up transactions. When sales can happen without hindrance, the rate of houses becoming available would likely increase. This approach is becoming a fast-growing sub sector of proptech called iBuying.

In Helsinki, Rive is a startup that is centralising everything one needs to flip a property. The service is designed to make selling homes faster, simpler and safer. It promises ‘instant purchase offers’, brokerage services, and uses AI to make everything go faster.

In Madrid, Clickalia promises an offer for your home in 24 hours and will buy it from you in seven days. It’s hard to know whether such ideas would ever take hold in the UK, but a more free-flowing housing market would help.

Technology rarely represents a cure-all for our deepest problems. And the housing issues faced by the UK are intensely bound up with economic trends, law and legacy practices. In the short term, proptech might help us live with the crisis, but it won’t solve the UK’s housing issues alone. Beyond this, the crisis requires prolonged government intervention, committed fiscal policy and more support for individuals. Time to start laying a new foundation.

By Matty Hay

Source: Evening Standard

Despite the cost of living crisis, UK house prices increased the most in eight months in February underpinned by improving consumer confidence and the resilient labor market, data from the Lloyds Bank subsidiary Halifax and S&P Global showed on Tuesday.

House prices logged a monthly increase of 1.1 percent in February, faster than the 0.2 percent increase posted in January, while economists had forecast a 0.3 percent fall.

This was the second consecutive increase and also marked the fastest growth since June 2022.

A typical house costs GBP 285,476 in February compared to GBP 282,360 in January.

Year-on-year, house price growth held steady at 2.1 percent in February, data showed. On a quarterly comparison, house prices fell 2.5 percent.

Halifax Mortgages Director Kim Kinnaird said recent reductions in mortgage rates, improving consumer confidence, and a continuing resilience in the labor market are helping to stabilize house prices following the falls seen in November and December.

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Nonetheless, with the cost of a home down on a quarterly basis, the underlying activity indicates a general downward trend, Kinnaird noted. Housing affordability will continue to pose challenges for many buyers with average house prices remaining high.

The substantial recovery in Halifax house prices in February added weight to the view that there will be a stand-off between buyers and sellers that causes transactions to slump, but with minimal price falls, Capital Economics’ economist Andrew Wishart said.

Housing data from Halifax was in stark contrast with the report published by Nationwide Building Society, which showed house prices declined the most in more than a decade in February.

Nationwide house prices fell 1.1 percent on year, marking the first fall since June 2020 and the biggest decline since November 2012.

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division.

The latest mortgage approvals data from the Bank of England also suggested weakness in the housing market. Approvals for house purchases fell to 39,600 in January from 40,500 in December.

The Bank of England has raised its benchmark interest rate by 390 basis points since the current tightening cycle began in December 2021.

By Renju Jaya

Source: RTT News

UK property prices have risen at their lowest-ever rate for February, according to data from the property website Rightmove.

Average asking prices for residential homes rose just £14 between January and February this year.

But the picture was mixed across the country, with prices rising and falling in different regions.

The average increase – effectively zero in percentage terms – is the smallest February rise ever recorded by Rightmove.

Months immediately after Christmas typically see big seasonal price increases, with more people buying and selling homes.

But average prices were still nearly 4% higher compared to a year earlier.

Rightmove said the negligible rise between January and February suggested sellers were realistically pricing their homes in order to sell them in a market that has slowed sharply in recent months.

House prices generally reflect the health of an economy.

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Rising prices help fuel economic growth, whereas falling prices can dent consumer confidence and dampen the economy.

This month mortgage lender Nationwide Building Society reported the longest run of monthly falls in selling prices since the 2008 global financial crisis.

Prices rose at different rates up and down the country, despite the average figure.

The North East, North West, West Midlands, East Midlands and East of England all saw decreases of -0.1%, -0.3%, -0.1%, -2.3% and -0.1% respectively.

Property prices in Scotland spiked by 7.5% over the month, followed by London (2.1%), Yorkshire and the Humber (1.9%), South West (1.6%) and South East (0.7%).

Growth in Wales was flat at 0%.

Tim Bannister, director of property science at Rightmove, said asking prices usually increase at this time of the year, which marks the beginning of the spring selling season.

‘This month’s flat average asking price indicates that many sellers are breaking with tradition and showing unseasonal initial pricing restraint,’ he said.

With asking prices remaining flat – rather than falling – Rightmove says this could be a positive sign that the housing market is not crashing as many analysts have predicted.

Economists polled by the Reuters news agency in November believed prices would drop by 5% in 2023, though even bigger falls have been predicted.

Still, there were some positive signs in the market.

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division.

Property demand was recovering after former prime minister Liz Truss’s botched ‘mini-budget’ in September 2022 which sent mortgage rates soaring.

Sales were up 11% in the first two weeks of February compared to the same period in 2019, Rightmove found.

After Truss’s mini-budget, which was widely criticised for recklessly cutting taxes, the number of sales in the housing market crashed by 30%.

The Resolution Foundation calculates the mini-budget cost the nation £30 billion.

Property sales remain down 11% on pre-pandemic levels.

By Josh Askew

Source: Metro

The UK housing market had a rollercoaster ride last year: house prices hit record levels and the Bank of England’s base lending rate increased nine times in the 12 months to December 2022, rising from 0.25 per cent to 3.5 per cent.

It created a lull in market activity and put the brakes on property prices.

So, what next? Optimists argue that a crash will not happen with current mortgage rates predicted to fall by up to 25 per cent this year. They also point to big lenders such as HSBC, Barclays, Lloyds and Natwest agreeing forbearance measures to help struggling borrowers: switching them to interest-only or competitive fixed rate deals.

Schroders research shows that average UK house prices are more than eight times average earnings; in London, that ratio rises to 11 times. Such stories make good headlines, but the economic mood is gradually changing – from general gloom to a more nuanced outlook.

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Market positives

Notably, the shift in economic sentiment is reflected by reduced rates for new two and five-year fixed mortgages: after spiking to 6.5 per cent last October, they have since fallen back towards the five per cent mark and below.

For potential buyers, interest rates are critical because they directly affect both affordability and lenders’ willingness to lend. After a decade of low interest rates, recent sharp swings have been unsettling.

Assorted lenders – Santander, Barclays, Nationwide and Halifax – now forecast imminent rate reductions to average around 4.5 per cent. Unusually, this comes as the base rate is anticipated to reach four per cent this week.

Mortgage rate cuts by big commercial lenders make the market more attractive and more affordable for domestic and first-time buyers – not just to overseas or cash buyers as happened when rates hit their recent highs. Despite media hype about reducing their mortgage lending, banks still have the appetite to lend.

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division.

A sense of calm

After last year’s shocks, calm has returned. Much has been digested by the market, including the ‘new normal’ in interest rates.

Potential increases are now factored into people’s thinking, so industry professionals can advise with greater confidence on where rates may head next.

Whenever the UK housing market is reportedly ‘down’, history shows it is never ‘out’. Buyers with available funding should press ahead on properties they really want. Good housing stock is not always available: in busier markets, people often lose out because of increased competition. Only those who are not yet able to buy should be waiting.

One caveat arises: UK incomes need to increase in real terms to boost domestic buyers’ purchasing power.

Without that, the market may still remain more attractive to overseas and cash buyers.

By Goli-Michelle Banan

Source: Mortgage Solutions

Repeat after me in a whiney little voice:

“House prices will drop by 30% in 2023”

“What goes up must come down and the property market is going to correct sharply”

“Don’t buy a house for at least 12 months. Wait for prices to drop”

“Crash, crash, crash – this is the sound of house values next year”

“It’s not a question of if prices will drop it’s by how much”

Unless you are a blind goldfish you will recall these mantras being wheeled out by certain ‘experts’ in the last quarter of 2022 – just a month or two ago – all desperate to be right and no doubt born of some personal political agenda or other. Much of this hogwash was then translated into newspaper headlines and news-reader scripts that set out the direction of travel for a housing market that they said was now ‘embattled’ and with no chance of finding decent health in 2023. A constant three month narrative amongst the chattering classes that said we will absolutely, definitely, most certainly see an inevitable meltdown. There was simply no way that it wasn’t going to happen.

So much so that if you Google “house price crash 2023 UK” 96 million results pop up. The doomsters and their half-empty glasses have indeed been busy.

I remember a similar scenario in early 2020 when the same experts predicted a bricks and mortar Armageddon due to the inevitable hardship we’d all face from the pandemic and from the resulting lockdowns.

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I also remember them trotting out the same lazy, ill-thought, opportunistic rubbish in 2014, 2015 and 2016 as we considered whether to Brexit or not. And then again when the threat of a ‘No deal Brexit’ was hung over our heads in 2018 and 2019.

So far, the doom-mongers have scored no points in this game in nearly ten years whereas brave pundits like myself (actually just me) have stated with logic and careful contemplation that in all of these scenarios house prices would not drop like the veritable stone. I even won some bets off the back of my positive predictions.

My view as frequently posted on social media and as stated in countless telly and radio appearances for TalkTV, GB News, LBC and the BBC was that prices, whilst they move around a bit and we’ll always see dips here and there, ‘would not end up lower 12 months hence’. I said this in 2015 and then every year until now. And I’m still saying it.

But what of now? Surely this time it’s different? We’re bound to see values drop due to the clumsy Kwarteng Budget triggering wholesale money cost rises coupled with a mad bloke in the Kremlin causing gas and electricity costs to skyrocket. Aren’t we? All whilst a Bank of England that’s been caught on the hop (you had just one job) hikes interest rates ever higher in order to mitigate the inflation that it itself contributed to by printing too much money and by not tweaking rates six months before it actually did. A woeful performance if ever there was.

Well no. I’m afraid that prophecies of the disintegration of UK property values have been rather overdone. Again.

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division.

As I write this, Rightmove has just published its January HPI which shows that asking prices have risen by 0.9% since last month. Yes, this is asking prices rather than sold prices but this is off the back of a 2.1% drop in December and a 1.1% drop in November and shows consumer sentiment quickly returning to positivity.

Halifax and Nationwide too had recorded a weakening of monthly prices in Q4. Nationwide’s analysis trends downwards by 5.1% since September and the Halifax HPI has eased by 4.3% in the same period.

But it’s my belief that much of this effect is a consequence of a startled public brought about by a ravenous media that has sought to scare us all as much as it could. Bad news gets more clicks, you see. It became a self-fulfilling prophecy whereby exaggerated headlines put buyers off of buying. This demand hesitance has then translated into lower prices via spooked sellers.

However, this angst will be short-lived.

Why do I think that? Pay attention – because the latest economic numbers look better. Much better.

Fixed rate mortgage rates are plummeting as Gilt yields have fallen through the floor. Unemployment remains ultra low. Wholesale gas prices have all but returned to pre-Ukraine invasion levels. Electricity bills will now fall. Therefore inflation has probably peaked. Which means there is less reason for the clowns in Threadneedle Street to squeeze us much further on the day to day Bank rate.

Ladies and gentlemen, the pressure is subsiding and soon it will be time to start your engines once again after this minor interruption to normal service.

And to those that continue to lament the housing market and to try to do everything they can to diss it – I’m sorry but once again you have failed.

Better luck next time. I’m sure you’ll keep trying though – as all failures should.

By RUSSELL QUIRK

Source: Property Industry Eye