It is easy to believe that property prices simply go up, especially if you look at the housing market over the past few years. But it simply isnโt true.
House prices can go down as well as up. They dipped sharply in 1995 and in the financial crisis of 2008. But in the wake of strong price growth, are we seeing a similar โcorrectionโ now?
No spring in the market
The property market has some seasonal peaks, and the most prominent is usually in spring, when longer evenings seem to tempt potential buyers out.
This year the spring bounce didnโt happen, with estate agents across the UK reporting a lack of potential buyers, and a death of homes for sale. The problem was a compound of high mortgage rates, and high inflation that left many families struggling with existing commitments, and certainly not ready to take on new ones.
There has been some good news on inflation, and hope for rate cuts in the near future. But the latest Halifax House Price Index shows the property market still looked flat in June, and may have dipped a little, although the annual figures are still upwards.
House prices rose 2.2% on an annual basis across all UK regions except for in East England where they fell 0.9%.
Northern Ireland recorded the strongest property price growth rising by 4% on an annual basis
In England, the steepest rate of house price inflation is found in the North West, up by 3.8% over the past year, now standing at ยฃ231,351.
London continues to have the most expensive property prices in the UK, now averaging ยฃ536,306, up 0.9% compared to last year.
The latest Halifax House Price Index shows that while annual price growth rose for the seventh consecutive month, typical values dropped by 0.2% on a monthly basis. It follows two months of flat growth and confirms that the market failed to benefit from its usual spring bounce. Buyers, it seems, are simply not ready to buy, but it is the shortage of available properties, rather than demand, that continues to underpin prices.
Halifax data shows that across the UK house prices have risen by just 0.4% this year โ at a time when inflation was still running above the 2% target.
Will the new labour government boost the market?
The concerns about the affordability of a new home might have been made worse still by the uncertainty of a general election.
Homebuyers and sellers may now be hoping that Labourโs general election win will now boost the property market, with promises of first-time buyer support and more building.
Borrowers will also be waiting for an expected interest rate cut from the Bank of England in the coming months, which could bring mortgage pricing down. Certainty is good for the market, and of having the new government in place could mean a boost for market activity. A post-election bounce is common in the housing market.
Labour has also promised measures to stimulate the market and to help people buy their own homes. The party has promised a Freedom to Buy scheme for new buyers and will build 1.5 million homes over the next five years - but it also plans to reduce the first-time buyer stamp duty threshold from ยฃ425,000 to ยฃ300,000.
What happens to house prices now?
The market remains subdued, though there are some signs that overall activity might at last be recovering.
Mortgage affordability is still the biggest challenge facing both homebuyers and those coming to the end of fixed-term deals. But inflation has slowed in recent months and there are hopes of interest rate cuts later this summer, which could bring down the cost of borrowing and boost buyer demand.
This issue is likely to be eased gradually, through a combination of lower interest rates, rising incomes, and more restrained growth in house prices.
Most analysts seem to be predicting modest but steady rises in the later part of the year, with stability in Westminster and falling interest rates.
Time to start thinking about a move?
If you need to make a move in the near future, or need to get a suitable remortgage deal on the home you already have, it could be time to get some expert help.
At Continuum we provide independent mortgage advice, which means we can search the entire lending market to find the most appropriate deal for you. The costs of mortgage deals are already falling, and with a static market, now could be the time to secure a home bargain.
Simply call us today for the help you need.
https://www.halifax.co.uk/media-centre/house-price-index
UK House Price Index summary: May 2024 - GOV.UK (www.gov.uk)
https://moneyweek.com/investments/property/Halifax-UK-house-prices-miss-spring-bounce-June
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.
You may have to pay an early repayment charge to your existing lender if you remortgage.
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