Mixed Messages for Buyers and Sellers from the UK Property Market

House Prices up or downIf you’re looking for a consensus on whether now is a good time to buy or sell a property in the UK, you might be struggling to find it.

It really does depend on who you listen to as to whether the growth of the sector has continued or stalled since the highs of 2021, and predictions for the rest of this year are also something of a mixed bag.

To paraphrase Donald Rumsfeld, there are known unknowns – the cost of living crisis, and its impact on the economy, are hard to quantify in real terms, while rising energy bills will be felt most harshly in the winter. Increasing interest rates will also leave many questioning if now is the time to take on a new mortgage.

So, like all good debates, I thought I’d compile the most recent research and opinion pieces on the UK property sector in one place, so you can draw your own conclusions as to the information that’s currently doing the rounds.

Reasons to Be Cheerful

While the annual growth of the property market has slowed, the average price of a home on a month-by-month basis is actually still buoyant.

So, house prices are 11.2% higher now than they were in May 2021, although that percentage was actually 12.1% when comparing the April of this year and last.

But the average price still increased in May – the tenth month in a row that the number had risen.

And so the various financial pressures that the average household are facing has not yet had any impact on the property market – quite the opposite, in fact.

The chief economist at the Nationwide bank, Robert Gardner, feels the positivity stems from a bullish jobs market. “Demand is being supported by strong labour market conditions, where the unemployment rate has fallen towards 50-year lows, and with the number of job vacancies at a record high,” he confirmed.

“At the same time, the stock of homes on the market has remained low, keeping upward pressure on house prices.”

For sellers, the best news is that prices have passed an average of £250,000 – the first time in history that such a landmark number has been surpassed.

Annual growth has been the highest in Wales at 11.6%, followed by the South West regions in Devon and Dorset that have shown a rise of 10.5%.

The East Midlands and the North West rounded out the top three in England, while the increase in London was a relatively small 3.6%.

There are suggestions that another interest rate increase could follow later in 2022, and so to that end now is as good a time as any to lock in a fixed price mortgage – long-term loans could be the order of the day with rates not expected be reduced to previous lows for a couple of years.

Reasons to Be Pessimistic

It does seem like a slowdown is inevitable, but the extent of that will be determined by how much – or little – consumer confidence is hit by the cost of living situation and other economic factors.

But even if buyers remain in a positive mood, their ambition to move up the property ladder – or even get on it at all for first-time buyers – could be impacted by lenders putting a squeeze on how much they are willing to loan.

The Bank of England has revealed that the number of mortgages approved by UK lenders in May had fallen to a low not seen since June 2020, and since January the real-terms drop is around 7,000 fewer loans being approved per month. That situation won’t be aided by the recent interest rate increase.

Another area of concern is selling price. The average price of a house on the market may be high, but that doesn’t mean that those properties are exchanging hands – and Zoopla are reporting that a number of sellers are being forced to slash prices by as much as 20% in order to get a deal over the line.

And there’s bad news for first-time buyers too. The average house price is now 8.5 times higher than the average salary, which adds further pressure on them to build a deposit fund able to bridge the cap not covered by their mortgage offer.