UK housing market outlook: negative and bearish


What is the reason for the decreased average house price in the UK in recent months?

Why did the Liz Truss economic plan lead to a shock to the UK housing market?

What is the outlook for the UK housing market?

How does the increase in mortgage rates affect the UK housing market?

UK house prices fell at the fastest monthly rate since February 2021 in October, according to Halifax, a new sign of a slowdown in the property market and reflecting the fallout from the country’s former government’s economic plan. The UK housing market has experienced severe ups and downs.

A decrease in the average house price in the UK

UK mortgage lenders said property prices fell 0.4 per cent from the previous month after falling 0.1 per cent in September. The average price has dropped to £292,598 ($334,508). According to Halifax, the slowdown was partly due to former prime minister Liz Truss’ September 23 “mini-budget” economic agenda, which sent UK’s financial markets into fall and raised borrowing costs.

A shock to the UK housing market

The presentation of this economic plan eventually led to replacing the Truss with Rishi Sunak. While a post-pandemic downturn was expected, there is no doubt that the housing market received a significant shock due to the mini-budget, which saw a sudden acceleration in mortgage rate increases, said Kim Kinnaird, Halifax mortgages Director.

Negative outlook for the UK housing market

According to the report, house prices in the UK have risen by an average of more than £22,000 (more than $25,000) over the past 12 months and almost £60,000 (+25.7%) over the past three years, which the bank called attention described. Bloomberg wrote in its report that a survey by a research firm in the UK shows that the outlook for house price returns has turned negative as mortgage interest rates rise.

The dominoes of falling housing prices in the world

Surveys show that the UK is also in the domino of housing price reduction in the world and is in a downward spiral. The decline in consumer confidence in the UK is causing concern about house prices. YouGov survey shows first negative reading since 2020 Covid-19 quarantine; house price outlook has weakened as mortgage rates rise. The results of the study show increasing pressure on the cost of living; inflation is near a 40-year high and is driving up the prices of all goods and services.

Predictions of the future of the UK housing market

Households are more pessimistic than ever when asked about their financial situation next year. The predictions of future housing prices have been strongly decreasing. The investigations of this report show that consumers are likely to evaluate the efficiency of their homes negatively in the short term. To control inflation, the Bank of England has increased mortgage rates six times since December, and the cost of mortgages has reached the highest level since 2016.

Expect price correction with a mortgage rate increase

Investors predict that the interest rate will increase to 4.5% next year. Kay Neufeld, director and head of Forecasting at the Centre for Economics and Business Research, said that people see a negative return on the value of their homes because, with the increase in mortgage rates, there is an expectation of price correction in the markets.

The approach of the UK government regarding the housing market

Rishi Sunak and Jeremy Hunt, the new Chancellor of the Exchequer, responded to this crisis by announcing possible tax increases and government spending cuts. According to Halifax, this could increase downward pressure on house prices. However, the lender added, “While the pace of annual growth also continued to ease, to +8.3% compared to +9.8% in September, average prices remain near record highs.”

Increase in rental rates in recent months

According to the Office for National Statistics (ONS), 6.8 million households in this country have mortgage loans. 4.8 million households live in rented houses, and most property owners have mortgages. On the other hand, reports indicate that one out of seven tenants in England saw an increase in rent in August. Shelter charity says that nearly 13% of those questioned in the period from July 28 to August 17 said their house’s rent increased last month.

Need help paying rent for English households

According to the survey results, among more than 2,000 renters, nearly one-third (32%) said that at least half of their household income is spent on paying rent. Three out of 10 renters (30%) said they always need help paying this amount or are close to this situation.

The UK government’s priority in terms of housing rental rates

The survey shows that 42% or two-fifths of tenants have experienced a rent increase in the past year (2021), and one in 10 (10%) has faced a monthly rent increase of more than £100. Acknowledging the deep economic problems, the new Prime Minister, Rishi Sunak, announced that he has made addressing this issue a priority in the government’s agenda. However, he has warned about tough decisions to solve the upcoming problems.

Decreased demand for newly built houses

The UK’s biggest housebuilder has announced that demand for new-build homes is falling rapidly due to economic turmoil and rising borrowing costs. According to a report by the Financial Times, Barratt Developments PLC said in its recent statement on home transactions that buyers are booking an average of 188 homes per week, compared to 281 in the previous financial year. According to the report, demand is significantly (49.4%) lower than annual demand over the past three years, reflecting the impact of new anti-inflationary policies related to the housing sector in the UK, as growing concerns about the cost of living increase with rates. Mortgage interest and reduced mortgage availability are compounded.

Challenges facing housing developers in the UK

The UK is struggling with recession and higher mortgage rates. As the cost of living crisis intensifies amid rising inflation and interest rates, housing prices have already begun to decline month-on-month. Rising mortgage rates and falling demand for housing will add to the challenges facing UK housebuilders. Construction costs have increased with inflation, affecting demand and hitting stock values in the sector.

Industry experts predict that the housing market will decline sharply in the coming year after 2022. Noticeable changes in housing inflation have caused the position of winners and losers to change in the real estate market. The increase in interest rates, as well as interest rates for housing loans in the US and then the UK, less than five months after the implementation of this critical monetary policy to control general inflation, caused a decrease in the emotional demand for house purchases and then changed the direction of monthly housing inflation in this country.

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