Is the UK Housing Market Improving?

by | Thursday 8th Jun 2023 | Mortgage News

Is the UK housing market improving? There is a lot of conflicting information in the news at the moment about the state of property purchase and sale in the UK. Some people are reporting that property prices are dropping rapidly due to a lack of appetite caused by the ongoing economic crisis, and others are reporting that prices are stable and interest in buying is on the up and up. So what do the real official figures actually show? And is investing in UK property a wise move?

Property Prices Dropping In the UK Housing Market

Earlier this week, the Guardian and several other news outlets reported that the UK has experienced an annual property price decline for the first time in 10 years. This means that in a year property prices have dropped on average for the first time after a decade of regular increases. Specifically a drop of 1% since May 2022. This is mainly down to rising mortgage interest rates and the general cost of living increase.

Property prices are normally driven up by demand and competition. Let’s take London for example. Because London is the capital city where many jobs are based, a lot of people want to live here. So, there is a disproportionate amount of people looking to purchase compared to available properties on the market. This allows sellers to increase the asking price of their properties and buyers to bid against each other to try and win the property. More money is paid to own a slice of London real estate, and this is generally how property price inflation occurs.

Competition For Property Has Declined

However, since the UK was plunged into an economic crisis, this competition has dwindled. People are more reluctant to spend money and are generally worse off financially, so do not want to pay over the odds for a property or even buy until the economy is more stable. Therefore the reduction in competition means that less people are driving property prices up, and sellers are being forced to reduce the asking price in order to ensure a sale. Driving their average price of a property down. According to The Royal Institution of Chartered Surveyors (RICS), the net balance for national house prices was -30%, indicating a decline. But it is at least a slower decline in house prices compared to February 2023 which was at -46%.

Interest In Property Purchases Increasing

RICS have recently reported that they have recorded the least negative net balance for new buyer enquiries over the past twelve months at -18% in May 2023, a potential sign that new property purchasers are having more interest in and faith in the UK property market. They have also discovered that the number of agreed sales in the UK showed a net balance of -7%, a lot less than was previously seen in March 2023 which was -29% and -18% in April 2023. New solicitor instructions for purchases are also reflected positively in RICS latest report with a net balance of +14%. The first time it has been reported as a positive since the beginning of 2022.

What could be the reason for these upward trends? Don’t get us wrong, for the majority of the data researched around the property market, the figures are still negative. However it does seem that things are picking up and people are regaining interest in purchasing and owning again. One reason for this could surprisingly be that people are feeling more comfortable now. Yes, prices are still high and so are interest rates but all signs point towards the direction of the cost of living dropping. Inflation is coming down (albeit slower than we hoped) and after the next round of base rate rises, we should start to see this figure drop even lower, forcing prices down.

People have got used to how their finances work in the new market now, and what their buying potential is. A drop in property prices has most likely encouraged more people to start looking at properties again, and the prospect of mortgage rates and the cost of other things coming down within the next 6 to 12 months are all things that have added to the recovery of the housing market.

Speak To a Mortgage Advisor About Purchasing a Property

If you feel like now might be a good time to invest in the UK property market by purchasing your first home or a buy to let, bow is a great time to explore your options with a mortgage advisor. Give a member of our team a call or drop us an email today to see how we can help. 

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If you have any questions about UK mortgage news or or anything you’ve read then please get in touch. We’d love to hear from you.

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