Housing Supply Improving, and Prices to Slowdown

25th May 2022

Housing Supply Improving, and Prices to Slowdown According a London estate agency, we are finally seeing signs of improvement for the supply of properties available.

Between recent warnings, and a base rate that is now at its highest level in over 13 years, some owners have been given motivation by the belief that house pries are peaking.

Data showed that the number of sales instructions in the week ending 14 May was the tenth highest figure in the last decade across the UK. Outside of London, instructions were at their highest weekly level in 10 years. Alongside this, the number of offers accepted across the UK was the highest weekly number in a decade which has caused urgency among seller.

“It feels like we are at a crossroads,” said James Cleland, head of the Country business in a London estate agency, “The number of buyers is still very high and now vendors are sensing that the market may be at its peak, hence taking offers and coming to the market. It is a sudden recognition that now is the time to act, brought on by all of the obvious factors coalescing at the same time.”

Together with the increase of housing supply, house prices are expected to slowdown as a result of the cost-of-living crisis coupled with increasing mortgage rates. The hope is that these factors will keep the pace of increasing prices in check.

As we have mentioned in a previous article, the Bank of England have announced that there are raising their interest rates which is taking the Bank Rate from a pandemic-era low of 0.10% to 1.00% since December. On top of this, it is expected to increase further in the future.

With the cost-of-living seeing a significant increase, and interest rates increasing, first time buyers are finding it harder to get on the property ladder.

The average cost of a home nationwide as of April 2022 was £360,101 according to Rightmove.

With the average price of homes at an all-time high, another reason why first-time buyers are finding it hard to be able to get on the property ladder is because mortgage lenders require a 10% deposit.

In a housing poll conducted by Reuters, one of the worlds largest multimedia news provider, respondents were asking what would happen to the affordability for those wanting to buy their first property over the next 2 years. Nine respondents said it would worsen and three said it would it improve.

For those that can’t raise the funds to purchase their first home, it appears that even the rental market could find prices increasing. Eight of nine respondents from the poll said affordability within the rental market would in fact worsen in the next 2 years and only one person said it would improve.

Henry Pryor, property market consultant said, “First time buyers will continue to struggle so long as prices continue to rise. Some landlords have had enough and are exiting the sector”

Predictions for the Property Market

Capital Economist predicts that house prices will fall by 4.8% overall by the end of 2024, in contracts to the 9% annual gain it forecasted for 2022.

Upon reviewing most forecasts which predict a small rise in house prices in 2023, it has been calculated that there will be a 3% fall. Following on from this, in 2024, there will be a further 1.8% drop in house prices.

It’s said that the fall would be as a result of the rising inflations, and the sharp rise in mortgage rates that we are going to see in the months ahead.

On top of this, customers may also find it more difficult to pass affordability tests for mortgages, or they will find themselves searching for cheaper properties, all due to many lenders factoring the rise of cost of living into their calculations.

Nicholas Mendes, mortgage technical manager at broker John Charcol, said: “Consumers' borrowing power is likely to wane as lenders take into account the extra costs associated with the current environment.

“With several lenders, affordability is based on income rather than considerations in the costs of living. But as the costs continue to escalate, we could see lenders exercise caution and start to consider other factors to ensure the mortgage remains affordable.”