UK house price growth slowed in 2023, raising doubts about BoE policy effectiveness.
High interest rates tackled inflation but negatively affected the British housing market.
However, house prices increased in October.
Is the UK going to face a new house price crash?
The UK housing market has long been characterized by its resilience and ever-upward trajectory. However, in recent times, a question has emerged: will the surging tide of British house prices encounter a long-anticipated reckoning?
This inquiry takes center stage, remaining resilient against the headwinds that have impacted various sectors of the economy. Even as global financial crises emerged and uncertainties loomed, property prices in Britain continued to climb. However, a new chapter may now be unfolding.
As the Bank of England (BoE) adjusts interest rates in response to economic conditions, the once-calm waters of the housing market have started to ripple with questions and concerns.
House Sales Pipeline Hits Four-Year High
An estimated £113 billion worth of homes are currently in the UK sales pipeline, the highest level since autumn 2020, according to Zoopla.
Around 306,000 homes are progressing toward completion—up 26% from last year. Zoopla notes that sales momentum remains strong and is likely to continue through December, with many recent agreements expected to be completed in early 2025.
The surge in activity is driven by first-time buyers and homeowners who waited for lower mortgage rates. Rising rental costs and easing mortgage rates are also encouraging more first-time buyers to enter the market.
Richard Donnell, executive director at Zoopla, said: “It is positive to see the sustained increase in sales activity over 2024, which reflects growing confidence amongst buyers and sellers supported by lower borrowing costs and rising incomes. Overall, the market remains on track for a modest 2% price increase in 2024 and 1.1 million sales.”
“First-time buyer numbers have recovered as mortgage rates have fallen, but a sizeable deposit is still required to buy.”
“The health of the housing market and people’s ability to afford housing is linked to the health of the economy. It’s vital the budget is focused on economic growth, expansion in jobs, and rising incomes. The primary focus should be on providing the financial support and investment needed to help build the homes the nation needs for buyers and renters.”
Chris McLaughlin, director at Bristol-based Ocean Estate Agents, said: “Many sellers, who had transitioned to rental accommodation during the period of higher interest rates, are now re-entering the market, often mortgage-free or with substantial deposits.”
“Buy-to-let activity has notably declined as smaller or ‘accidental’ landlords exit the market, influenced by less favorable financial conditions and increasing regulation.”
Prices Increase in October – Rightmove
According to data from Rightmove, the average asking price for new homes in the UK rose by a more modest 0.3% in October compared to the previous month. This is a significant decrease from September’s 0.8% increase and well below the typical seasonal rise of 1.3% for October.
Year-over-year, asking prices increased by 1.0% in October, down from 1.2% in September.
Rightmove reported a substantial 29% increase in agreed sales in October compared to the same period last year. This marks a strong recovery from a weaker market in 2023.
The increased availability of properties has empowered buyers to negotiate more effectively, contributing to the slower pace of price growth.
Despite the slowdown, underlying buyer demand remains robust, as evidenced by a 17% increase in inquiries from potential homebuyers. The number of properties available for sale has also risen by 12%, reaching its highest level per estate agent since 2014. This intensified competition has put pressure on affordability-stretched buyers and may be further exacerbated by pre-budget jitters.
Eyeing Budget Clarity
UK home buyer demand remains strong, but price growth has moderated amidst increased buyer choice.
Rightmove analyst Tim Bannister commented on the subdued price growth, noting that buyers now have more options than since 2014. Sellers are urged to price competitively to attract buyers, especially in the face of stretched affordability. While market activity has not slowed, some buyers are reportedly waiting for budget clarity and anticipated lower mortgage rates later this year.
The average five-year fixed mortgage rate has risen slightly from 4.55% to 4.61% this week, but it remains significantly lower than the peak of 6.11% in July 2023.
Despite the potential impact of budget changes, Bannister maintains a positive outlook for the UK housing market in 2025. He anticipates a surge in market optimism once the budget details are announced, followed by interest rate cuts. While affordability remains a significant challenge due to high mortgage rates, anticipated rate cuts could provide a much-needed boost to buyers.
The UK budget is scheduled for Oct. 30, and there are rumors that the government may end the stamp duty discount introduced by the previous administration. This change could increase homebuyers’ costs, particularly those purchasing properties above certain thresholds. Bannister warns that this could lead to a rush to complete deals before the changes occur.
First-time buyers are already facing financial pressure from rising mortgage payments. The potential increase in stamp duty would further strain their finances, making it even more difficult to enter the housing market.
Where To Buy
The recent surge in house prices has made it increasingly difficult for many prospective buyers to enter the property market. However, new research from Zoopla highlights several affordable areas where buyers earning around £20,000 a year can still purchase a home.
Data reveals that Inverclyde in West Central Scotland is the most affordable location, with an average house price of £106,100. Based on borrowing 4.5 times their income, a buyer earning £20,040 annually could purchase a property here. East Ayrshire follows closely, with average house prices of £106,800, requiring a salary of £20,160. West Dunbartonshire ranks third, where homes average £110,000, needing an income of £20,770.
In England, Hartlepool stands out for affordability, with an average house price of £114,100, accessible to those earning £21,550 per year. Other affordable areas include Blackpool and Burnley, with average prices of £123,600 and £120,100, respectively.
Scotland dominates the list of affordable regions, with half of the top 20 cheapest postcodes located there. The PA25 postcode in Cairndow, Argyllshire, boasts the lowest average price in 2023 at just under £55,000. Other affordable Scottish locations include Renfrewshire, Glasgow, and North Ayrshire, where property prices are below £130,000.
In England, Middlesbrough’s Berwick Hills (TS3) is the most affordable area, with an average asking price of £95,104. Meanwhile, Ferndale (CF43) is the most budget-friendly area in Wales, with average property prices at £118,990.
Other affordable locations include Kingston Upon Hull, North Ayrshire, and Sunderland, where annual salaries of £21,630 to £23,000 are sufficient to buy a home.
Prices Rise Beats Expectations, Halifax
House prices increased 0.3% in September, mirroring the rise observed in August. Annual price growth reached 4.7%, the fastest pace since November 2022, according to the latest data from the Halifax house price index.
The average property now costs £293,399, the highest since June 2022. Interestingly, the amount first-time buyers pay is now about £1,000 lower than two years ago.
Regionally, Northern Ireland continues to lead the UK in property price growth, with a 9.7% annual rise in September. Wales also saw significant growth, with prices up 4.4% year-over-year, while Scotland experienced a more modest 2.1% increase. The North West recorded the most robust annual growth in England at 5.1%.
London remains the most expensive area for property, with average prices now at £539,238, reflecting a 2.6% annual rise. However, this is still below the city’s peak of £552,592, set in August 2022.
Expert Comment
Amanda Bryden, Head of Mortgages, Halifax, said: “UK house prices climbed for the third month in September, with a slight increase of 0.3%, or £859 in cash terms. Annual growth increased to 4.7%, the highest rate since November 2022. This brings the average property price up to £293,399, just shy of the record high of £293,507 set in June 2022.”
“It’s essential to view these recent gains in context. While the typical property value has risen by around £13,000 over the past year, this increase is largely a recovery of the ground lost over the previous 12 months. In two years, prices have increased by just 0.4% (£1,202).”
“Market conditions have steadily improved over the summer and into early autumn. Mortgage affordability has been easing thanks to strong wage growth and falling interest rates. This has boosted confidence among potential buyers, with the number of mortgages agreed up over 40% in the last year and now at their highest level since July 2022.”
“While improved mortgage affordability should continue to support buyer activity – boosted by anticipated further cuts to interest rates – housing costs remain challenging for many. As a result, we expect property price growth over the rest of this year and into next to remain modest.”
House Price Growth Slows – ONS
UK annual house price growth has slowed, with an increase of 2.2% in the year to July, bringing the average to £290,000, down from 2.7% in June, according to ONS data. Average prices rose to £306,000 in England (1.6%), £218,000 in Wales (2.0%), and £199,000 in Scotland (6.0%). Northern Ireland saw a 6.4% increase to £185,000 from April to June. The North East had the highest growth at 3.8%, while London experienced a 0.4% decline.
According to ONS, rental prices continue to rise at a near-record rate, with an average of £1,286 per month in August 2024—an 8.4% increase from the previous year. London recorded the fastest rental growth, while the South West saw the slowest at 6.4%.
The report was released as separate ONS figures on Wednesday showed that UK inflation remained unchanged at 2.2% last month, marking the second month in a row that it has remained above its target 2% level.
BoE’s Impact on Estate Market
Laura Suter, Director of Personal Finance at AJ Bell, anticipates a status quo from the Bank of England this week.
Despite the recent rate cut in August, the Bank of England is widely expected to maintain interest rates at 5% during this week’s meeting.
The central bank has been cautious about rapid rate reductions, signaling a preference for a gradual approach. While markets currently favor a hold, a small cut to 4.75% remains a possibility.
The upcoming inflation data could introduce some uncertainty into the Bank’s decision. A deviation from expectations could influence the monetary policy committee’s assessment.
With no meeting scheduled for October, the Bank avoids the potential conflict of making interest rate decisions immediately before the Budget. This allows time to analyze the government’s fiscal plans and inform subsequent policy decisions in November and December.
“Regardless, interest rates are expected to end the year at 4.5% – signaling two successive cuts before Christmas. That would be the best present that wannabe homeowners could get, with a mortgage rates war already hotting up. More interest rate cuts could put fire-starters under the housing market once again, which has already seen activity pick up since last month’s cut. Equally, a hold to interest rates this month might mean that some buyers decide to delay their house buying journey until later this year, in anticipation of lower interest rates,” Suter said.
Nationwide Reports a Surge Too
Annual house price growth in the UK accelerated in August, reaching its highest rate since December 2022. Nationwide Building Society reported that property values across the UK rose by 2.4% year-on-year, up from 2.1% in July, bringing the average house price to £265,375.
Nationwide’s chief economist Robert Gardner commented: “Although UK house prices fell by 0.2% month-on-month in August, accounting for seasonal adjustments, the annual rate of growth continued to rise.”
He highlighted that the 2.4% annual increase was the fastest since December 2022, when growth was 2.8%.
“Despite this growth, prices remain about 3% below the peak seen in summer 2022,” Gardner added.
“While house price growth and market activity are still subdued compared to historical trends, they demonstrate resilience in the face of higher interest rates and the fact that prices remain elevated relative to average earnings. Assuming the economy continues its steady recovery, we expect housing market activity to gradually improve as affordability constraints ease, driven by modestly lower interest rates and wages outpacing house price growth.”
Mortgages Hit a New Record
The number of mortgages approved for homebuyers surged to its highest level since the mini-budget was introduced under former Prime Minister Liz Truss.
According to the Bank of England, 62,000 mortgage approvals were recorded in July, the highest figure since 65,100 were reported in September 2022.
Mortgage rates spiked following the “growth plan” statement by then-Chancellor Kwasi Kwarteng in September 2022. However, in recent weeks, mortgage rates have been gradually declining, and earlier this month, the Bank of England lowered its base rate by 0.25 percentage points to 5%.
The Bank’s Money & Credit report showed increased house purchase approvals from 60,600 in June. In contrast, remortgaging approvals (which only account for loans with a different lender) dropped to 25,100 in July, down from 27,300 in June.
House Sales Increased
According to HM Revenue & Customs figures, the number of home sales in the UK in June was 8% higher than in the same month the previous year.
There were an estimated 91,370 transactions, an 8% increase from June 2023 but slightly lower—less than 1%—than in May 2024. HMRC noted that this slight month-on-month decline marks the first decrease since December 2023.
Iain McKenzie, chief executive of the Guild of Property Professionals, commented, “Transaction numbers have been steadily growing for some time now, and a month-on-month decrease is nothing but a fly in the ointment. The market still shows strength when compared to the previous year, with June’s figures 8% higher than the same time last year.”
He added, “It’s important to consider these figures in the broader context of the market’s recovery. The overall trend for 2024 remains positive, and higher transaction levels than last year suggest that buyer confidence is gradually returning to the market.”
What Is a House Price Crash?
A house price crash, often known as a housing market crash, can evoke anxiety among homeowners, potential buyers, and economists. Fundamentally, a house price crash represents a substantial and abrupt decline in the prices of residential real estate, particularly within the housing market. It marks the point where the seemingly relentless increase in property values abruptly halts and takes a sharp, often painful turn downward.
During a house price crash, homeowners typically encounter challenging circumstances. The value of their most significant asset, their home, diminishes, making it difficult to sell or refinance. Those who purchased their homes at the market’s peak may find themselves in a state of negative equity, owing more on their mortgage than their home’s current value.
For potential buyers, a house price crash can present a mixed picture. On one hand, it makes homes more affordable. However, it can also serve as an indicator of economic instability and the possibility of stricter lending standards, which can complicate the home-buying process.
In summary, a house price crash is a pivotal event within the real estate market, with far-reaching economic and social implications. It signifies a significant and sudden drop in home values, influenced by various factors. Understanding the causes and consequences of such a crash is vital for both current homeowners and those aspiring to enter the property market.
What Causes a Property Market to Crash?
The property market, often considered a pillar of stability in the economy, can sometimes experience dramatic downturns, leading to a property market crash. Such crashes can profoundly affect homeowners, investors, and the broader economy. But what are the factors that can cause a property market to crash?
Economic Downturns
One of the primary triggers of a property market crash is an economic recession. During economic downturns, people tend to have less money to spend, leading to declining demand for properties. As unemployment rises and consumer confidence wanes, homebuyers become scarce, and sellers may lower their prices to attract buyers.
Interest Rate Hikes
Central banks control interest rates to manage inflation and economic growth. When interest rates rise, borrowing becomes more expensive. This can lead to reduced demand for homes, particularly in areas where mortgages are the primary means of home purchase. Higher interest rates can also put pressure on homeowners with adjustable-rate mortgages.
Speculative Bubbles
Property markets can experience speculative bubbles, where prices rise significantly above their intrinsic values. This can be fueled by speculative buying, often with the expectation of quick profits. When the bubble bursts, property prices can fall dramatically, leaving investors and speculators with significant losses.
Tightened Lending Standards
Financial institutions often tighten lending standards in response to economic conditions or regulatory changes. When lending standards become more stringent, it can be harder for buyers to secure mortgages, leading to a decline in demand and, subsequently, property prices.
Overbuilding
An excess of new construction projects can lead to an oversupply of properties. This can happen when developers overestimate demand or when market conditions suddenly shift. An oversupply can put downward pressure on property prices as sellers compete for a limited pool of buyers.
Natural Disasters and Local Factors
Local conditions, such as natural disasters or job market fluctuations, can impact property markets. For instance, an area prone to natural disasters like hurricanes or earthquakes may experience property market crashes due to property destruction and a decrease in demand.
Global Economic Crises
Major global economic crises, like the 2008 financial crisis, can substantially impact property markets. These crises can lead to widespread economic uncertainty, job losses, and a lack of confidence in the property market.
Market Remained Subdued In June
Britain’s housing market remained soft in June. Still, surveyors were more optimistic about the outlook following this month’s parliamentary elections and with the likelihood of interest rates falling, according to a survey released on Thursday, July 11, 2024. The Royal Institution of Chartered Surveyors‘ monthly net balance of house prices stayed at -17, the joint lowest reading since January.
FYI, latest RICS survey suggests activity in the UK #housing market slowed a little more in June as some potential buyers were put off by renewed uncertainty over interest rates (and, perhaps, the election?).
“Although activity across the housing market remained subdued last month, forward-looking aspects did improve slightly,” said Tarrant Parsons, RICS senior economist.
He said that the anticipated decrease in borrowing costs and the new government led by Prime Minister Keir Starmer’s increased focus on house-building were positive signs for the sector.
The RICS survey also indicated the highest level of sales expectations for the next three months since January 2022.
Mortgage Lending Set To Fall In 2024
Mortgage lending is anticipated to decline in the coming year, with an expected rise in arrears and repossessions, as outlined by UK Finance, a trade association for the UK banking and finance industry. Despite ongoing challenges in the mortgage market, UK Finance suggests that the primary affordability pressures are currently reaching their peak. ù
While the easing of financial strains may take time, improvement is projected in 2025. UK Finance predicts a decrease in lending for house purchases to £120 billion in 2024, down from £130 billion in 2023. External remortgaging activity is expected to decrease to £60 billion from £65 billion, and the value of internal product transfers is forecasted to fall from £219 billion to £202 billion in 2024.
There were 61,140 mortgage approvals in the UK in April 2024, which is broadly flat (-0.2%) compared with March after 5 consecutive monthly rises in mortgage approvals, but… (1/n)#ukhousing#housingpic.twitter.com/zTwa4yHsyr
The report emphasizes that various factors are mitigating payment issues, ensuring that over 99% of the 10.8 million mortgages in the UK are currently not in arrears.
New Bank of England data, revealed on May 31, 2024, shows there were 61,100 mortgage approvals for house purchases in April, slightly down from March’s 61,300 and below forecasts of 61,500.
However, mortgage borrowing rose significantly last month, with £2.4 billion borrowed in April compared to £0.5 billion in March.
Mortgage approvals are an indicator of future borrowing.
The remortgaging market also cooled, with net approvals for remortgaging (with a different lender) decreasing to 29,900 from 33,500. This suggests higher mortgage rates deterred people from switching to new deals.
UK Homes For Sale Hit A Record High
Britain’s housing market has reached its highest supply of homes for sale in eight years, a trend that experts believe will curb house price increases for the rest of 2024.
According to Zoopla, a leading property website, the average estate agent now has 31 homes for sale—up 20% from the same period last year and the highest number since 2016. This surge in listings translates to approximately GBP 230 billion worth of homes on the market, as more sellers are re-entering the housing market in growing numbers.
Many homeowners postponed their moving decisions in the latter half of last year as higher borrowing costs impacted house prices and buyer demand, dampening confidence. Nearly one-third of the homes currently for sale were also listed in 2023 but failed to find buyers.
The number of homes for sale has generally grown *faster* than the increase in the number of sales agreed 🏡
This replenishes the supply of homes for sale and means more choice for buyers 👇 pic.twitter.com/yQIQgDEO8W
However, an anticipated drop in mortgage rates this year, coupled with rising sales volumes over the past six months, has improved market sentiment. Experts predict that the Bank of England may cut interest rates in the coming months, following a decrease in headline inflation to 2.3% in the 12 months to April 2024, down from 3.2% in the previous year.
The number of house sales agreed has increased by 13% compared to this time last year, though it still lags behind the supply level, providing buyers with a broader selection of properties. This trend is expected to keep house price inflation in check. Zoopla’s latest index shows an annual house price deflation of 0.1%, indicating a slight price decline over the past year.
Despite a 0.4% increase in house prices over the last quarter, quarterly growth has slowed in the past month. Zoopla anticipates that house price inflation will remain flat for the year.
Can the UK Government Stop a House Price Crash?
The prospect of a house price crash in the UK raises concerns for homeowners and various industries that rely on a vibrant property market. According to Heather Powell, head of property and a partner at the tax and advisory firm Blick Rothenberg, government intervention is needed to prevent further price declines and safeguard the market.
Powell emphasizes the importance of implementing schemes to reinvigorate the property market, stating, “The continuing decline in residential property sales highlights the sluggish pace of recovery for industries tied to a healthy property market. The government must take action promptly to reenergize this essential aspect of the UK economy.”
She advocates for a regime that encourages first-time buyers without inflating property prices. She suggests that incentives like ‘Help to Buy,’ tailored to regional price ceilings, could be beneficial. Such measures can unlock the capital generated by a thriving property market, contributing to the broader economic recovery.
What Is The Help to Buy Scheme?
The ‘Help to Buy’ scheme, initiated in 2013 to aid aspiring homeowners, ceased accepting new applicants in October 2022 and is yet to be replaced by the government.
Powell also highlights the ripple effect of the property downturn, affecting industries beyond homeowners.
Estate agents, removal companies, decorators, carpet and furniture stores, and many other businesses dependent on the property market have witnessed declining sales in 2023. Their forecasts for the next six months remain bleak, raising concerns about the impact on tax revenues and government funds.
Property sales figures for the year ending July 31, 2023, show a significant drop compared to the preceding years. This situation not only affects households but also impedes the overall recovery of the UK economy.
The issue extends to the difficulty homeowners face in selling their properties and starting anew due to limited demand. First-time buyers also struggle to accumulate sufficient deposits, leaving a void in the market.
In summary, the potential for a house price crash in the UK is a multifaceted challenge with broader economic implications. Government intervention and carefully designed schemes are crucial to address the issue and protect both homeowners and the industries connected to the property market.
When Will UK Interest Rates Stop Rising?
The Bank of England‘s recent moves on interest rates have been closely monitored. Forecasts suggest a significant reduction in the base rate to approximately 3% by late 2025. This would mark a substantial decline from the current 5.25%. But it still represents a rise-and-fall pattern of interest rates that could be likened to a rocket and a feather.
Since December 2021, the Bank of England has consistently increased the base rate over 14 consecutive adjustments. Market expectations regarding where the base rate will ultimately peak have been ever-shifting, influenced by incoming economic data and factors such as inflation, wage growth, and unemployment.
Market sentiment suggests that the base rate may have peaked at 5.25%. However, Paul Dales, Chief UK Economist at Capital Economics, presents three reasons for cautious optimism.
First, anticipated Ofgem utility price cap reductions and other positive factors could push CPI inflation down to about 4.6% in October. Second, the service CPI inflation rebound is considered temporary. Third, slowing average earnings growth suggests wage growth, a key domestic price pressure indicator, may have peaked.
Nevertheless, Dales cautions that the UK’s inflation issue is unlikely to resolve swiftly. The labor market’s relaxation has gradually, and high inflation expectations persist. Consequently, the decrease in core inflation and wage growth is expected to be gradual rather than sudden.
While it is doubtful that the Bank of England will further increase interest rates, it might not be able to reduce them until late 2024.
Would a Stamp Duty Cut Keep Property Prices Rising?
The property market, especially in the United Kingdom, has been a subject of intense interest and debate in recent years. The interplay of various factors, including demand, supply, and government policies, greatly influences property prices. One such policy that has been considered a powerful lever in influencing property market dynamics is the stamp duty.
Stamp duty is a variable tax on UK property purchases. Governments have occasionally introduced temporary reductions or exemptions in response to economic challenges or to boost the property market. The question that often arises is whether such cuts can effectively keep property prices upward.
To understand this, it’s essential to consider the dynamics at play:
Demand and Affordability
Reducing or exempting stamp duty can make properties more affordable, particularly for first-time buyers and those looking to move up the property ladder. This can increase demand, putting upward pressure on prices, especially in the lower to middle segments of the market.
Market Sentiment
Positive news of a stamp duty cut can boost market sentiment, increasing buyer confidence. This sentiment can translate into a flurry of property transactions, further stimulating price growth.
Regional Variances
Property markets in the UK vary by region, and the impact of a stamp duty cut can differ significantly. In regions where affordability is a key issue, a cut can be more influential in driving up prices.
Short-Term vs. Long-Term Effects
Stamp duty cuts often have a more pronounced effect in the short term, creating a transaction surge. Whether this leads to a sustained increase in property prices in the long term depends on various factors, including economic stability, job growth, and housing supply.
Fiscal Policy
Stamp duty cuts’ effectiveness in sustaining price growth can also depend on broader fiscal policies and economic conditions. An isolated tax cut may not be enough to counteract the impact of a broader economic downturn.
It’s worth noting that while a stamp duty cut can influence property prices, it is not a standalone solution. Property markets are multifaceted, and various internal and external factors influence their trajectories. Additionally, stamp duty cuts can have implications for government revenues, which may affect funding for public services.
In conclusion, a stamp duty cut can certainly provide a short-term boost to property prices and market activity, particularly in regions where affordability is a concern. However, its ability to keep property prices rising over the long term depends on a complex interplay of factors. Sustainable price growth typically requires a supportive economic environment, adequate housing supply, and measures to address broader affordability issues.
Analysts View
Sarah Coles, Senior Personal Finance Analyst at Hargreaves Lansdown, highlighted the potential risks associated with stimulating housing market demand through measures like stamp duty cuts.
Coles points out that such incentives could drive up house prices. This may happen especially in a market already grappling with tight housing supply and increasing mortgage payments due to rising interest rates. She parallels past experiences, where stamp duty holidays effectively boosted demand, potentially leading to price increases.
Coles highlights that tax cuts, though generally favored by buyers, won’t solve the current property market challenges.
A comprehensive approach is needed to address these issues effectively. Simply boosting demand without addressing supply constraints may lead to more buyers vying for limited housing stock, potentially driving prices up. This phenomenon was observed during the stamp duty holiday prompted by the COVID-19 pandemic.
Richard Fearon, Chief Executive of Leeds Building Society, echoed the concern about the consequences of using tax cuts to boost demand. He suggests that a more sustainable solution lies in investing in building an adequate supply of houses rather than relying on widespread stamp duty reductions. Fearon argues that such tax-driven strategies may inflate house prices, exacerbating first-time buyers’ challenges.
He pointed out that governments have historically favored quick-fix demand-boosting measures over addressing the structural issues within the housing market. The focus should be on ensuring a balanced supply of properties to achieve more lasting and equitable growth.
In summary, the experts raised concerns about the potential pitfalls of demand-stimulating measures like stamp duty cuts. They stress the need for a comprehensive approach that addresses both supply and demand issues within the property market to promote sustainable growth.
Where Will There Be a UK House Price Crash?
This year, house prices declined, initially hitting the South of England. But now, higher interest rates are affecting other regions too. In the current landscape, house prices are experiencing declines in all areas of England. The East of England and the South East have witnessed the most significant price falls over the past year, registering -2.4% and -2.2%, respectively. North East Yorkshire and the Humber are marginally experiencing negative growth at -0.1%.
In a notable shift, house prices in Wales have recorded an annual decrease of 0.2% for the first time. They increased by 0.1% just in the previous month. In Cardiff, house prices have seen a year-on-year decline of 0.2%, matching the rate observed in the preceding month.
Among major UK cities, Bournemouth, Cambridge, and Southampton have experienced the most substantial house price drops, with declines of -2.6%, -2.3%, and -2.0%, respectively.
FAQs
What impact do interest rates have on UK house prices?
Affordability, mortgage costs, investment costs, consumer confidence, marke liquidity, investor behavior, economic conditions and general debt levels are all factors affected by interest rates and that, in turn, affect house markets. Interest rates directly affect affordability and the cost of borrowing, influencing demand and market liquidity. Additionally, interest rates indirectly influence consumer confidence, investor behavior, and overall economic conditions, all of which can contribute to fluctuations in property prices.
Will UK house prices fall in 2024?
By the end of 2023, house prices are expected to have fallen by 5% over the course of the year, with a further anticipated decrease of 2.4% in 2024, according to a Lloyds Banking forecast. These projections suggest a total 11% decline in property prices from their peak in the previous year. Santander, another major financial institution, is predicting a larger drop in UK house prices for the entirety of 2023, estimating a decline of approximately 7%, followed by a more modest 2% fall in 2024.
When was the last property price crash?
The last UK property price crash was during the Great Financial Crisis in 2008-2009, when the average prices in the UK fell by 15.6% between February 2008 and February 2009.