a A recession in the UK seems almost inevitable – but some property agents have reported a buying frenzy and a flood of properties in the housing market, as people try to move home before interest rates are further increased to beat high inflation. Huh.
“Some buyers decide to come in now before the next round of interest rate hikes, and subsequent months add a degree of urgency to the market,” says Lucian Cooke, head of residential research at estate agent Saviles.
Knight Frank and Hunters are among property agents reporting more properties coming to market. Hunters managing director Gareth Williams says: “The past two weeks have seen a significant uptick and the final week was Hunters’ best listing week of the year.”
“We are at a crossroads,” says Andrew Grocock, a regional partner at Knight Frank. “Nothing has dropped yet. August was our busiest August for new listings in London for 10 years, and our busiest month since September 2020.”
But the economic situation seems to be in danger. Even with the £2,500 price cap freeze promised by Liz Truss this autumn, the energy bill will double from last year, Inflation rate just below 10%, real wages are falling And interest rates are expected to reach 3% by the end of the year. Bank of England expected to raise borrowing costs To counter inflation again this week, at least 50 basis points from 1.75%, despite the dark economic outlook. “For buyers, ‘I’m going to do it now because I’ll get a better mortgage rate and I’ll probably be able to borrow a little more than I can in three, four or five months,'” Grocock says.
But people will not pay a hefty premium for property and will think twice before committing themselves, say experts, with the possibility of a slowdown in the fourth quarter.
Despite the buying frenzy in some areas of the housing market, there are enough signs that it is coming off the boil. The official home price index showed 15.5% year-on-year growth in July, a 19-year high, but the comparison has been artificially inflated. Sales were unusually low in July 2021, as the stamp duty holiday introduced to boost the market during the pandemic ended on June 30.
According to Halifax, the UK’s largest mortgage lender, Annual rate of home price increase fell to 11.5% in August. Barratt, the country’s largest housebuilder, provided further evidence of a slump in the housing market, saying that the number of homes reserved each week by the end of August had fallen below a year-ago level, and now compared to before the pandemic. was lower, partly due to “increased macroeconomic uncertainty”.
Shares of housebuilders have fallen over the past year, with Persimmon, Barratt and Taylor Wimpey down between 38% and 48% before the end of the help-to-buy scheme next spring. Yet many companies point to a chronic shortage of homes in the UK and the improved energy efficiency of new homes, which they say will reduce demand.
Consultancy Capital Economics is forecasting a 7% drop in home prices over the next two years, and says demand is already falling sharply. Barring March and April 2020, when the pandemic forced the closure of the housing market, the balance of new buyer inquiries surveyed by the Royal Institution of Chartered Surveyors fell in August to their lowest level since 2008.
with Unemployment lowest in nearly 50 yearsat 3.6%, and only Expected to grow in mid 2023 In the Bank of England’s latest forecast, most experts are expecting the housing market to slow rather than crash. Jeremy Leaf, an estate agent in north London, says: “I am anticipating a recession. There are fewer inquiries, and prices are already softening a bit. It is becoming a normal market, which was prevalent before Covid. ,
Seville is in the process of revising its forecast of a 1% drop in home prices next year, which may well be mitigated, Cook says – “however, as things stand, the housing market is expected to decline. Nothing like the degree seen during the early 1990s and 2008-09”. According to the Nationwide Building Society’s House Price Index, prices fell 19% in three-and-a-half years in the early ’90s and the same in 18 months due to a credit crunch.
Cook says that since three-quarters of borrowers are on fixed-rate mortgage deals, and an increasing number are settling for five years (instead of two), they are in a better position to avoid rising borrowing costs. However, UK Finance figures show that 1.8m mortgage deals are due to expire next year and will need to refinance at a time of rising rates.
Rent is also getting expensive. Many tenants have been forced to choose smaller properties – one- and two-bedroom flats – property firm Zoopla reported last week, while new students in Manchester and other cities including Bristol, Glasgow and Edinburgh are having to. Commuting from neighboring cities due to university housing crisis,
Rents hit record highs in the summer. Zoopla found that the average rent across the country increased by £115 a month over the previous year, reaching £1,051. The rent is now more than a third of the ordinary income of a single earner. The website Hometrack, which is part of Zoopla, believes rental growth is nearing peak, running at an annualized rate of 12.3% for the country as a whole, and in London at a “shaky” 17.8%, up double digits. decline during the post-pandemic.
40-year-old Yasir Khan lives in an 8-square-metre flat in Walthamstow, east London, which has a shower, toilet and a full cooker. When he lost his job in 2018, he became homeless and lived in a shelter until Hackney Council found his flat. The rent of £811 comes from his sovereign debt. She has severe depression and panic attacks, and fears going out. At the same time, he feels “trapped” in a small space, which he says is “as big as a prison cell”.
“I’m struggling a lot, because I’m on profit and it’s pretty much impossible to find something suitable for me,” he says. He’s looking for a large one-bed flat, but there aren’t enough properties in London to afford £1,100 a month. He moved to London to be with his nine-year-old daughter, who lives with his ex-wife.
“Four million people rent in the private rental market. Next year is going to be a very worrying time for them,” says Henry Prior, a buying agent. “The uncertainty is huge at the moment, people are worried about jobs. Mortgage lenders are more concerned about people who are self-employed, landlords wanting larger deposits – this is what it looks like when the fizz comes out of the housing market. ,