What is happening in the housing market?

According to the Halifax, house prices have fallen.

Following a year of exceptionally strong growth with growth of around 11.8% UK house prices fell last month for the first time since June 2021.

But there is no need to panic. That fall was just 0.1%, and with the average house price now standing at £293,221,  the price is just £365 down from the previous month’s record high. House prices remain more than £30,000 higher than this time last year.

Wales recorded the strongest house price inflation of any region or nation, with annual growth of 14.7% taking the average cost of a home to £222,639. In England, homes in the South West had the largest rises, with growth of 14.3% to hit an average price of £310,846.

But what does the future hold, and the question many people are asking is simply whether their home, which is also their biggest investment, is going to fall in value.

At Continuum we are looking for the answer.

Why are prices falling?

The house price explosion of recent years was based on a combination of factors. The Covid crisis was behind many of them. Interest rates at the lowest they have ever been meant that paying a higher price for a home had very little impact on actual monthly expenditure. The stamp duty holiday, meant to keep the market alive may have worked rather too well. Plus of course, many people built up a reserve of disposable cash during lockdown, when spending anything was difficult.

Now stamp duty is back, interest rates and consequently mortgage costs are heading up – and any spare cash is earmarked for the cost of energy and everyday living as inflation heads skywards.

But will house prices cease to rise, or actually fall?

A complex picture

Some experts are predicting house price falls as interest rates climb. A drop of 5% or even 10%  has been mentioned. 

But there are at least two factors that are maintaining the price of homes in the UK. One is a shortage of homes, and particularly of homes for sale. The second is that there have been some major changes in the structure of the market, thanks to post covid changes in the way we live.

Working at home is a great deal more comfortable in a house with a spare bedroom and a garden than it is in a flat. Remote or hybrid working means that living close to the office or even to the commuter line is no longer as vital as it was.

As a result the focus of the market has changed. City centre flats may be the first to suffer price corrections, while larger homes in the suburbs may continue to be sought after and maintain their upward trajectory – at least for the next few months.

Prices of bigger homes, including detached houses, have risen more than twice as fast as the price of flats in a shift in demand towards bigger properties, rising by 15.1% and 7.7% respectively, again according to the Halifax figures.

The outlook for your home

Demand for homes still outstrips supply – and falls, if they do come, will not affect every part of the market in the same way.

Your home may stand the best chance of avoiding a fall if it is:

A house, rather than a flat.

Is larger than average, and detached or a semi, rather than a terrace.

Is in a suburban area, not too far from a city centre – but not in the centre itself.

What happens now?

There could actually still be some growth in the market – although it is unlikely to be anything like that we have seen in recent months. The Bank of England’s decision to relax mortgage lending rules could provide a temporary boost to demand and buying power.

But mortgages have become notably more expensive in recent months – so if you are planning a move, or a remortgage, you need to act fast. Even if prices are no longer likely to shoot up, interest rates probably will.

To secure the most suitable mortgage product to meet your current needs and circumstances whilst interest rates that are still comparatively low, simply call us at Continuum – today.

The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable mortgage products you should seek independent financial advice before embarking on any course of action.

Your home may be repossessed if you do not keep up repayments on your mortgage. 


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