UK residential property prices edge closer to their 2022 peak, even as affordability concerns persist for buyers, in anticipation of the upcoming Autumn Budget.
UK Housing Market Shows Signs of Slowing Growth but Remains Resilient
In a shift from the rapid house price increases seen in previous years, the UK housing market is experiencing a slowdown, according to the latest reports. The Halifax House Price Index predicts a stable but slower growth for the rest of 2022 and into 2023, with prices expected to continue rising modestly.
Despite the moderation in growth, the housing market remains resilient. This is partly due to the easing of mortgage rates, a result of the Bank of England's interest rate cut in August. The housing market has also been boosted by a decrease in inflation in recent months.
Guy Gittins, chief executive of London agent Foxtons, has noted a return of buyer confidence to the market. Currently, at Foxtons, the pipeline of agreed sales is at the highest level since before the referendum in 2016. However, the Autumn Budget, expected to be announced later this year, may dampen demand from the end of October due to anticipated tax rises.
The North West of England has the strongest house price growth of any region in England, with an annual increase of 5.1%. London, known for its high property prices, averages £539,238, although it is still below its peak of £552,592 set in August 2022. On the other hand, Northern Ireland is currently recording the strongest property price growth of any nation or region in the UK.
The average amount paid by first-time buyers has increased by 4.2% over the past year, reaching £232,769. Despite this increase, estate agents are adopting a more optimistic tone, expecting low single-digit price growth this year.
Tom Bill, head of UK residential research for Knight Frank, expects a relief bounce in activity before Christmas that lasts into next spring. He attributes this to the easing of mortgage rates and steady wage growth. However, affordability challenges persist, with the average UK house price currently at £293,399, close to the record high of £293,507 set in June 2022.
Amanda Bryden, head of mortgages at Halifax, shares a similar outlook, expecting property price growth for the rest of 2023 and into 2024 to remain modest. Coastal and rural homes are being hastily put up for sale, suggesting a shift in buyer preferences.
In conclusion, while the UK housing market is experiencing a slowdown in growth, it remains resilient due to factors such as easing mortgage rates, steady wage growth, and ongoing demand for properties. However, affordability challenges persist, and the Autumn Budget may impact demand in the latter part of the year.
Personal finance advisors may encourage individuals to invest in real-estate, taking advantage of the ongoing demand for properties and the moderation in interest rates following the Bank of England's interest rate cut. Despite the anticipated tax rises from the Autumn Budget, the resilience of the housing market could lead to a relief bounce in activity before the end of the year. Long-term investors might consider diversifying their portfolios by acquiring properties in regions showing strong house price growth, such as the North West of England, Northern Ireland, or coastal and rural areas, where there seems to be a shift in buyer preferences. However, it's crucial to assess the affordability of those properties, given the current high average house prices in the UK.
