UK house prices over the last year (source: tradingeconomics.com)
The housing market in the UK, especially places like London and the Southwest has always given off the impression of being very strong. Idyllic city based property and beautiful rural home bases seem to get snapped up for above average asking prices, and people are seemingly fighting tooth and nail to get their dream home. However, sadly that has not really been the case over the last few months.
The UK Property Market
Unfortunately, like many things in the UK at the moment, the housing market really took a battering over the last few months to few years. So many things have happened over the last few years that it is quite difficult to pinpoint one specific instigating factor for the financial struggles that the UK markets are currently experiencing. But one of these is certainly the onset of the COVID-19 pandemic. The forced self isolation of the pandemic stagnated the property market initially. Causing massive decreases in property transactions and things like new home mortgage enquiries.
But, after spending 24 hours a day locked away in our tiny flats and tired old properties, people were chomping at the bit to start looking at new homes. UK house prices improved significantly as bidding wars drove up the value of property, and soon people were buying and selling for way above average. Yet this small improvement would only last a short while as the UK was soon plunged into another financial whirlwind.
The Cost of Living Crisis and The UK Housing Market
UK inflation spiralled out of control due to overspending during and after COVID, and an ill thought out budget by the former government forced the hand of the Bank of England to increase their base rate. Everything got and continues to get more expensive. Mortgage rates went up meaning that more people were reluctant to buy new properties, the cost of energy bills, food, water, fuel all increased and we as British people are now worse of financially than before. There is no doubt about that.
A drop in disposable income and an increase in the cost of living had a knock on effect on the housing market and subsequently the UK house prices. Fewer people were showing interest in buying, fewer people were competing for property, and fewer bidding wars were driving up prices. Fewer mortgage applications were being approved too (around 40% less in a year). That led to a drop in UK house prices of over 4% in less than one year.
UK House Price Growth Has Increased
In Nationwide Building Societies latest house price index, it seems that things are looking up in terms of UK house value growth. After seven consecutive months of price decreases, it looks like April 2023 saw an increase in house prices of 0.5%. Annual house price growth still remains in the red (negative) at -2.7% which was expected and understandable, but this small increase is definitely a positive sign for the market.
What could we see over the next few months? Well that depends entirely on on what happens after the next Bank of England monetary policy committee meeting this month. In May 2023, the Bank of England will sit down again and consider whether or not they will raise the base rate again in an attempt to lower inflation. After increasing the rate significantly over the last few months, UK inflation has only dropped marginally. Signalling that more drastic action might need to take place, and most people expect the base rate to be increased.
If this in turn triggers mortgage rate increases and more financial struggles for people, this could very well have a negative impact on house prices. But, people still need to have places to live, mortgages are still available, and if you have the right advice and guidance, you can still get a really good deal on a property.
Speak To a Mortgage Advisor
If you are thinking about buying a property in the next few months but are concerned about UK house prices, the best place to start is with a mortgage advisor. Give our team at Oportfolio mortgages a call today to see how we can help.
