House price data - May 22

ended 20. July 2022

This morning at 09:30, we're getting the latest Land Registry house price data for May 2022. With rates looking set to rise further after today's inflation data (9.4%), what's going to happen to the property market during the course of the next 12 months? Will the lack of supply and stock support prices or are they going to fall? Or are we simply likely to see the rate of price growth stabilise or slow? Just a paragraph or two will do.

11 responses from the Newspage community

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The perfect storm of rising inflation, higher interest rates and quantitative tightening will almost certainly take the UK into a recession. The effect of this will bring the average UK house price down by around 10% within the next 12 months. When that happens, the Bank of England will reduce interest rates and off we go again.
We are not going to see house prices fall this year although rising interest rates will likely slow the runaway rate of growth, which is no bad thing. How much of this is driven by actual costs in borrowing or lenders tripping over each other to not have the cheapest deal lest they get inundated is unclear. Santander, for example, held rates a few weeks ago which was very admirable but the industry rumour is that they ended up with 25% of all UK mortgage applications that week and have had a bit of a battle with service levels since because no lender is geared up for that demand. We have even seen some lenders stop taking applications for a week to catch up with paperwork. At the end of the day we still live in a country where there is a lack of housing and no plan, political follow through or even available trades people to build enough homes. If we continue to not build enough houses, prices will always go up. I expect to see a slower rate of growth in prices as the year goes on but still healthy growth nonetheless.
With such a chronic shortage of housing stock, a growing and ageing population and new housing starts below the level to tread water, will perpetuate the supply side problems and keep prices high. Anyone expecting a property crash to pick up a bargain will be disappointed; however, with rising rates, we’ll see prices level off, hopefully allowing people's incomes to try and catch up. However, an increase in delinquent loans and bad credit is sure to appear in Q1 leading to more specialist lending occurring throughout 2023.
The issue with Land Registry data, although more accurate than some reports, is that it is based on houses sold a good few months ago, so it’s a solid account of what has happened, not what is happening and so it makes it a very difficult data set to use to guess at what will happen. Anecdotal reports from more up to date sources indicate we’re starting to see the signs of the housing market cooling, which has been forecast for a while now, as the cost-of-living increases come through and people are seeing their monthly bills increase and people's concern about rising interest rates tempers their enthusiasm to buy property.
With high inflation and borrowing costs, we are likely to see a far more modest price increase. That said, with the lack of supply, a downward price correction is unlikely.
House prices rose spectacularly again in May and though that rate of growth is likely to cool, it's hard to see prices falling, as supply levels are so low. We’re also still seeing evidence of people wanting to move out of large, expensive cities for a better quality of life and more space in rural areas, where they can take advantage of working from home. Even the Bank of England increasing rates is going to have little effect on house prices for now, as most people are on fixed rates and stock is critically low.
We are seeing the last push in values as hopeful sellers and agents, wanting to maximise their return, decide to market before prices cool. Buyers are starting to think that waiting a little longer will show them some savings. We will see a slow-down, how deep and for how long will depend upon how we all feel come September.
Much like the weather this week, the property market looks likely to come off scorching highs but stay pretty warm. With demand for good-quality homes remaining high, price growth seems set to slow rather than reverse.
With food inflation at its highest for 14 years, energy costs expected to almost triple by January, fuel prices soaring, and cheap mortgage rates fast disappearing in the rearview mirror, I expect house prices to fall over the next year. Yes, there is a housing shortage but current prices are only sustainable with a thriving economy and ultra-cheap credit. Those days are gone. Lower house prices will be a good thing in the long run, particularly for first-time buyers. Far too high a proportion of people's income is spent on mortgages or rent. It's slowly strangling the economy.
Despite rising interest rates, average house prices still seem to be steadily growing. Although if the base rate keeps increasing, then its likely to dampen demand in the near future. I am not expecting a large drop in in prices but I would be more worried if I owned property in the south of England. Prices in London and South East are at much higher multiples of average incomes, making them more at risk from rate rises and inflation pressures on affordability.
Despite the vice like squeeze on household spending house prices continue to romp away. Several factors are counter balancing the ever rising mortgage rates and inflationary pressures. Housing stock remains very low, employment very high and despite rising interest rates they are still at historically low levels. Add to this a surge in demand for holiday lets and second homes coupled with the rush from first-time buyers to get in ahead of the looming help-to-buy deadlines and I believe the market will remain strong until the end of the year at least. Beyond this, with further rate rises very likely and the jump in the energy price cap in October then next year could be where any marked slowdown occurs but I wouldn’t be predicting a full-scale crash.