Though there has been a significant increase to the cost of living, UK house prices are set to rise further in the upcoming months.
In light of the ongoing supply-demand imbalance, it is predicted that this will drive residential property prices even higher through the spring despite growing pressures on household finances and rising borrowing costs. According to the reallymoving House Price Forecast, average property prices in England and Wales is set to hit an all-time high of £389,712 in June 2022.
The shortage in supply, combined with the incredibly strong buyer demand, is preventing property sale prices from falling which is normal circumstances would be the case when households come under sudden financial strain.
Looking at deals that are already agreed between buyers and sellers, it is expected that prices will rise by 4.7% in April, and 6% in May before slowing down to 1.3% in June. This is a direct result of competition between buyers for the limited stock.
On the other hand, it is anticipated that the residential property market will flatten later this year as inflation increase and mortgages become more expensive.
Mortgage brokers have suggested that there is a growing mismatch between what home buyers are willing to pay to secure a property against competition, and what lenders are prepared to lend based on their own valuations. With a base rate rise to 0.75% in March, this makes mortgages more expensive at a w=time when household finances are already stretched.
Rob Houghton, CEO of reallymoving, commented: “House price forecasts for the coming quarter suggest we’re heading into a period of strong price growth, but when taken in the wider context what we’re actually seeing are prices being inflated by a severe supply squeeze. This is forcing the market upwards, masking the impact of inflation and rising costs on household budgets which we would normally expect to rein in price growth.
“Having less money in their pockets will ultimately deter people from taking on more debt as they move up the ladder, and at some point, in the near future this will slow house price growth. Much will depend on the volume of new listings we see coming onto the market and the speed at which lenders push up the price of fixed rate mortgages.”
What will happen to property prices in 2023?
A popular London estate agent has predicted that house prices will continue to increase, however at a much slower rate. The reason behind this is that the need for more space has calmed down as we begin to see normality after the pandemic.
Not only this, but house prices are not showing any signs of decreasing over the next 5 years, although price growth is expected to slow.