The UK housing market shows resilience, despite a slight dip in the latest price index. According to Halifax, the average UK house price fell by 0.4% in September but remains slightly higher than when the Bank of England began its 14 base rate hikes.
Property prices saw a 4.7% annual decline in September, with southern England experiencing the most significant drops. The typical UK home now costs £278,601, which is over £39,000 higher than pre-pandemic levels, though still around £14,000 below a previous peak.
Despite these fluctuations, the housing market appears more robust than expected. It’s noteworthy that the current average UK house price remains above its pre-rate hike levels, signaling a degree of stability in the market.
These dynamics reflect ongoing changes in the UK housing landscape, with various regions experiencing different levels of impact, but overall, the market maintains a level of resilience.
Kim Kinnaird, Halifax’s mortgage director, observes that current activity levels in the housing market appear subdued compared to recent years. Industry data shows lower numbers of new instructions to sell homes and agreed sales. The primary factor affecting this slowdown is borrowing costs, mainly due to the impact of higher interest rates on mortgage affordability. As a result, homeowners are becoming more realistic about their target selling prices, reflecting the shift towards a buyer’s market.
However, with the base rate now likely at or near its peak, there’s a noticeable easing of fixed-rate mortgage deals from their recent highs. Strong wage growth has also contributed to improved affordability, with the house price-to-income ratio reaching its lowest level since June 2020, standing at 6.2 in September.
Many economists and financial markets predict that the base rate will remain higher for an extended period, with significant rate cuts appearing unlikely until inflation gets closer to the Bank of England’s two percent target. Overall, these factors are expected to keep mortgage rates relatively high compared to recent years.
This, in turn, may limit buyer demand and exert downward pressure on house prices in the coming year. Despite these challenges, the housing market continues to evolve, and industry professionals are closely monitoring these developments as they shape the future of the property market.
Tom Bill, head of UK residential research at Knight Frank, predicts that the financial challenges will persist into the next year as people come off fixed-rate deals. However, there’s hope for improved sentiment, which is crucial for the housing market.
He believes that most of the UK’s house price adjustment will occur this year, with modest single-digit annual growth expected after the next general election.
Jeremy Leaf, a north London estate agent, concurs, stating that the results align with what they see in practice. Business is operating at a lower level, influenced partly by the anticipation of lower interest rates and higher rents, which discourage some from entering the rental market, especially first-time buyers.
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