Where next for the UK residential property market?
After a busy 2022, during which house prices hit record levels over the summer the effect of inflation, still stubbornly high continue to dominate commentary of the state of the property market. But as we predicted in December, house prices have not fallen off a cliff, writes Clive Scrivener, Partner at Wimbledon based Chartered Surveyors Scrivener Tibbatts.
The property optimists and pessimists continue to take opposite positions about what all of this may mean for the future direction of UK property prices. Optimists suggest that a dramatic crash has been averted as current mortgage rates are predicted to fall as much as 25 per cent by the year end.
They also point to several of the UK’s largest lenders – including HSBC, Barclays, Lloyds Banking Group and NatWest – agreeing forbearance measures with the government to help struggling borrowers. These come in anticipation of a surge in late mortgage payments as 1.8mn people will need to re-mortgage when their fixed-rate deals expire this year.
Despite some media hype that banks are reducing their mortgage lending, there is still an appetite to lend.
Such measures, last used during the 2008-09 global financial crisis, are an attempt to avoid repossessions and alleviate borrowers’ financial pain. They include switching mortgage holders to interest-only deals or to competitive fixed-rate deals without an affordability test being required.
People have come round to the idea that the era of low interest rates is now over.
Reported here by FT Adviser, according to Schroders, the average house in the UK currently costs more than eight times average earnings; in London, the ratio reaches 11 times salary. However, the increased unaffordability of mortgages relative to net incomes, which are subject to both an inflationary and a fiscal squeeze, is being helped by the lower interest rates we are seeing lenders offering.
Although the negative stories of crashes and recession make for good headlines, the pessimists’ views that they fuel are on the wane. To some degree, global economic sentiment has begun to shift, albeit slowly, from one of uniform gloom to a slightly more nuanced outlook that is arguably more focused on logic than fear.
As a leading indicator of where things are headed in corporate earnings, for example, UK equity markets have been back on an upward trajectory for the past three months.
Our advice remains the same. If you’re looking to sell, sell. If you’re looking to buy, buy. None of the newspaper gossip will be relevant in three, ten or thirty years’ time. Unless you’re a property speculator, most of us are buying homes. Most of which the newspapers overlook in their screeching headlines predicting boom or bust.
If you would like to discuss something related to a property valuation please contact Clive Scrivener direct via email at Clive@scrivenertibbatts.co.uk or call 020 8971 2983.
