After an autumn flurry, is the UK housing market going to fall at last? | Housing market

A The UK recession seems almost inevitable, but some estate agents have reported a buying spree and a rush of properties on the property market as people try to move out before interest rates rise further to control the high inflation.

“Some buyers have made the decision to move in now ahead of the next round of rate hikes, and that has added a degree of urgency to the market in recent months,” says Lucian Cook, head of residential research at real estate firm Savills. .

Knight Frank and Hunters are among the estate agents reporting the most properties on the market. Gareth Williams, managing director of Hunters, says: “The last two weeks have seen a significant increase and the last week was Hunters’ best trading week of the year.”

“We are at a crossroads,” says Andrew Groocock, regional partner at Knight Frank. “Nothing has fallen yet. August was our busiest August for new listings for 10 years in London, and our busiest month since September 2020.”

But the economic circumstances look threatening. Even with the £2,500 price cap freeze promised by Liz Truss this autumn, energy bills will be double what they were last year. inflation remains just below 10%, real wages are falling and interest rates are expected to reach 3% by the end of the year. The Bank of England is expected to raise borrowing costs again this week to fight inflation, despite the increasingly gloomy economic outlook, by at least 50 basis points from 1.75%. “For buyers, there’s a feeling of ‘I’m going to do it now because I’ll get a better mortgage rate and I’ll probably be able to borrow a little bit more than I will in three, four or five months.’ ‘” Groocock says.

But people won’t pay a huge premium for property and will think twice about stretching too far, experts say, with a recession looking likely in the fourth quarter.

Despite the buying frenzy in some areas of the real estate market, there are ample signs that it is coming off the boil. The official house price index showed annual growth of 15.5% in July, a maximum of 19 years, but the comparison is artificially inflated. Sales were unusually low in July 2021, as the stamp duty holiday introduced to prop up the market during the pandemic came to an end on June 30.

According to Halifax, Britain’s largest mortgage lender, the the annual rate of growth of house prices fell to 11.5% in August. The nation’s largest homebuilder, Barratt, provided more evidence of a downturn in the housing market, saying the number of homes reserved each week through the end of August had fallen below the previous year’s level and was now lower than before the pandemic. in part due to “increased macroeconomic uncertainty”.

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Homebuilder stocks have tumbled over the past year, with Persimmon, Barratt and Taylor Wimpey down 38-48% before the end of next spring’s help-to-buy program. However, many of the companies are optimistic, pointing to the UK’s chronic housing shortage and improving energy efficiency of new homes, which they say will support demand.

Capital Economics consultancy forecasts a 7% drop in house prices over the next two years and says demand is already falling sharply. Except for March and April 2020, when the pandemic forced the housing market to close, the balance of inquiries from new buyers in the Royal Institution of Chartered Surveyors survey fell to its lowest level since 2008 in August.

With Unemployment lowest in nearly 50 yearsto 3.6%, and only expected to start rising in mid-2023 In the latest Bank of England forecast, most experts expect the housing market to slow down, rather than crash. Jeremy Leaf, a North London estate agent, says: “I’m expecting a slowdown. There are fewer inquiries and prices are already softening a bit. It is becoming a more normal market, a return to what was prevalent before Covid.”

Savills is in the process of revising his forecast for a 1% drop in house prices next year, which could well be reduced, Cook says, “although, as things stand, not to a degree similar to that seen during the housing market recessions of the early 1990s and 2008-09”. Prices fell 19% over three-and-a-half years in the early 1990s and a similar amount in 18 months in the wake of the credit crunch, according to the home-price index from building society Nationwide.

Since three-quarters of borrowers are in fixed-rate mortgage deals, and a growing number are locking in for five years (rather than two), they’re in a better position to withstand a rise in the cost of borrowing, he says. Cook. However, figures from UK Finance show that 1.8m mortgage transactions are scheduled to be finalized next year and will need to be refinanced at a time of rising rates.

Rent is also getting more expensive. Many tenants have been forced to opt for smaller properties (one- and two-bedroom flats), property firm Zoopla reported last week, while new students in Manchester and other cities, including Bristol, Glasgow and Edinburgh, have to traveling from neighboring cities due to a university housing crisis.

Rents rose to record levels during the summer. Zoopla found that the average rent across the country increased by £115 per month over the last year, reaching £1,051. Rent now accounts for more than a third of the typical income of a single worker. The Hometrack website, which is part of Zoopla, believes that rent growth is close to peaking, with an annual rate of 12.3% for the country as a whole, and an “unsustainable” 17.8% in London, after double-digit growth. decline during the pandemic.

Yasir Khan says it’s ‘impossible’ to find something suitable to rent in London with benefits. Photography: Yasser Khan

Yasir Khan, 40, lives in an 8-square-meter flat in Walthamstow, east London, which has a shower, toilet and kitchen. When he lost his job in 2018, he was left homeless and lived in a shelter until Hackney City Council found him a flat. The rent of £811 comes out of the universal credit of him. He has severe depression and panic attacks, and is afraid to go out. At the same time, he feels “trapped” in the tiny space, which he says is “as big as a prison cell.”

“I am struggling a lot, because I have benefits and it is quite impossible to find something suitable for me,” he says. She’s looking for a larger one-bedroom flat, but there aren’t many properties available in London that he can afford, at £1,100 a month. He moved to London to be near his nine-year-old daughter, who lives with his ex-wife.

“Four million people rent in the private rental market. For them, next year is going to be a very worrying time,” says Henry Pryor, a purchasing agent. “The uncertainty is huge right now, people are worried about work. Mortgage lenders are more concerned with self-employed people, homeowners want larger deposits – this is what it looks like when the housing market fizzes out.”

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