Most of us base our financial plans on some simple assumptions. One of them is that the value of our home will rise, providing us with an appreciating asset, steadily building equity that we might call on at some point in the future.
But UK house prices actually suffered a surprise dip of 0.1% month-on-month in August, the latest data from Nationwide Building Society suggests.
Newspaper headline writers have naturally seized on the statistic and predicting gloom and doom and a collapse of the housing market. In the real world, things are not that dramatic.
What happened?
The dip is real, but very small. 0.1% is the kind of figure that only statisticians can identify by looking across the entire market and has very little impact on the price of a single house in the real world.
And besides, it is merely a small pause in the steady market growth. It means that the annual growth figure fell a little, to 2.1% in August, down from 2.4% in July.
True, the average UK house price now stands at £271,079, down from £272,664, but your house is still probably worth more than this time last year. How much more depends on a whole raft of factors from the region it is in, to your taste in decoration.
What is important is that most experts believe that far from the fall off the cliff predicted by the newspaper pundits, the market will kick back into growth for the remainder of the year.
So why was there a dip in house price growth?
There are actually several factors behind the house price dip.
Potential changes to stamp duty and fears of a mansion tax on homes above £500,000 are leaving both buyers and sellers hesitant about completing some deals, in case they find themselves hit with tax liabilities in the autumn budget
There may also be buyers keeping their powder dry waiting for another interest rates cut signal to make a move, in the knowledge they could potentially secure a better deal with lower monthly repayments once rate cuts filter through to lenders.
Plus of course there is the simple fact that in August may people are thinking more about a trip to the sun rather than their local estate agent.
Fewer buyers mean less competition for the homes that are available, and prices may fall back a little as a result. Sellers are being forced into pricing more realistically, and accepting offers to secure a sale when buyers hold the upper hand.
But will house prices fall?
Those buyers who are in a good position might be able to get a worthwhile saving on the price of their next home by making an offer, but those expecting giveaway prices and a market collapse are likely to be disappointed.
A subdued pace of house price growth is understandable, given that affordability remains stretched. House prices are still high compared to household incomes, and mortgage rates remain much higher than many buyers can remember. Mortgage costs are in the region of more than three times the levels prevailing in the wake of the pandemic.
But a shortage of homes across the country will probably prevent any large-scale falls In the foreseeable future. Borrowing costs are likely to moderate a little further if bank rate is lowered again in the coming quarters, and income growth continues.
What should you do?
If you are planning on buying a first home or a move up the housing ladder, you might be able to take advantage of the current dip to get the home you want for a little less.
The key is to have arranged your mortgage before you make an offer – allowing your seller and their agent to know that your offer is ‘proceedable’, that you have the money and can be ready to move fast.
Arranging a mortgage offer before buying or even deciding on a particular home – known as an offer in principle – is simple if you have an expert on your side.
A call to us at Continuum could let us get to work to find the lender likely to provide the most appropriate terms for your particular circumstances, and to arrange a mortgage in principle from them.
So, what should you do as a buyer? Call us at Continuum today.
Annual house price growth softens in August
Average UK house price falls as ‘market catches its breath’ | The Independent
Is stamp duty changing? Here’s what we know so far | Property news
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to a particular mortgage product and you should seek independent financial advice before embarking on any course of action.
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