Recent data defies expectations, but sellers are cautioned to “fasten their seatbelts” in anticipation of rate increases.
Given that the most recent data continues to show month-over-month growth, predictions of an impending property price crash appear to have been premature.
Nationwide said that average UK property prices increased 11% in the previous year despite the mounting cost-of-living problem. The building society’s chief economist, Robert Gardner, added that the market had “retained a surprising degree of momentum.”
“Strong labour market conditions, where the unemployment rate stays near 50-year lows and with the number of job openings close to record highs,” Gardner added, “continue to sustain demand.” “At the same time, the small number of available properties has contributed to maintaining upward pressure on home prices.”
Barrows and Forrester’s James Forrester, managing director, told Sky News that “market momentum continues unwavering, having withstood a prolonged period of Brexit uncertainty, a worldwide pandemic, increased inflation, and the most incompetent prime minister in living memory.”
He continued that nothing short of the apocalypse “feels like everything considered” can drive the real estate market to its knees.
So, If And When Do Property Values Decline?
The market has been unexpectedly robust during the Covid epidemic and despite the deepening cost of living issue, according to The Guardian. This has been made possible by a strong employment market, a continuous lack of available houses, and a “competition for space” amid the surge in home working.
However, Nationwide’s headline growth rate does not provide the complete picture, as The Telegraph pointed out. According to the report, growth has slowed to its lowest level in 15 months “as rising mortgage rates dampen demand.”
Building society records show only a 0.1% increase in the past month, and The Telegraph noted that “these increases disguise declining buyer desire.”
“The big lesson from the July numbers is that house prices may already be stagnating,” Capital Economics’ Andrew Wishart told the newspaper.
Put Your Seatbelts On
Chris Hodgkinson, managing director of HBB Solutions, warned home sellers to buckle up even if housing costs are still sky high: “We’re going to witness a time of heightened instability before the year is out.”
He claimed that buyer demand levels were beginning to “wane” and that sellers would be forced to lower their asking prices once the market “well runs dry.”
The Daily Express reported that as pressure on household budgets increases, the market “is projected to somewhat lose momentum” due to inflation reaching a 40-year high and driving up living expenses and loan rates. According to Bloomberg, rising mortgage interest rates and soaring inflation “are beginning to take a toll.”
Mortgage approvals decreased further in June, according to data released by the Bank of England last week, as lenders boosted interest rates to their highest level since 2016.
Bloomberg said that this week would see another spike in borrowing prices for homeowners as the central bank is anticipated to intensify its fight against inflation by delivering its first half-point rate increase in 27 years.
According to Alice Haine, a personal finance expert at Bestinvest, the market will be “damped” by Thursday’s anticipated bank rate increase to 1.75%, she told the BBC.