The UK housing market is expected to remain subdued in the near term due to anticipated interest rate hikes and a decline in home prices. According to Nationwide, house prices fell 3.4% year-on-year in May, with the average cost of a UK house now at £260,736. While the building society reported tentative signs of a market recovery in April, it now predicts that headwinds within the industry will strengthen in the coming months. The Bank of England’s expectations of higher interest rates, coupled with projections of longer periods of higher rates, may cause an increase in mortgage rates and hinder the real estate market’s ability to recover.
Additional piece:
The UK’s housing market has been through a tumultuous few years, and the current climate seems to signal that the worst is not yet over for buyers and sellers alike. Facing a decline in home prices over the last year and recent changes to the market landscape, the real estate industry requires innovation to address its biggest challenges and remain afloat.
One of the industry’s paramount concerns is the pandemic’s long-term impact, especially as the country enters a new phase of relaxed restrictions. Although the news of vaccination drives, the return of in-person property viewings, and historic economic relief may signal progress, the pandemic has drastically transformed the market and may continue to do so. For instance, remote work has altered homeowners’ housing preferences, with more people desiring larger spaces, home offices, and outdoor areas.
Lending restrictions and regulations have also reshaped the market, making it difficult for potential buyers to obtain mortgages and investments. Additionally, the industry is still grappling with the effects of Brexit, with the market awaiting its long-term impact on housing prices. Concerns about rising housing prices and affordability also persist, particularly for those seeking affordable and feasible housing options.
However, despite these challenges, some industry experts are optimistic about the housing market’s resilience and are actively seeking innovative solutions. For instance, there is a growing interest in modern methods of construction (MMC) to create affordable modular homes and help boost supply in the low-cost market. The construction of MMC homes requires less labor and can be completed more quickly than traditional methods, making it an appealing option for those looking to create affordable and sustainable housing solutions.
Experts are also turning towards technology to address some of the housing market’s hurdles. For example, the digitization of the property search process, which has been in the works for years, has seen a significant uptick in use during the pandemic. Virtual property tours and remote property viewings employing advanced technologies like 3D imaging, video, and drones have become popular options for conducting property searches, enabling both buyers and sellers to be more involved in the process regardless of their physical location.
In conclusion, the housing market’s current challenges may appear daunting, but there is still hope for the future. A proactive approach, incorporating innovative and technological solutions, may help the industry recover from its current slump and create a more accessible and affordable housing market overall.
Summary:
The UK’s housing market is facing a challenging path in the forthcoming months, as the aftermath of the pandemic and Brexit, rising housing prices, and affordability concerns continue to affect the industry. While there is a decline in home prices, the Bank of England’s expectation of higher interest rates and a decline in mortgage availability may hinder the industry’s recovery. Industry experts are looking towards innovative and technological solutions to help address the industry’s most significant challenges, including digitization of the property search process and the rising popularity of modern methods of construction (MMC) to create affordable modular homes and boost supply in the low-cost market. While the road ahead seems difficult, a proactive approach that includes innovative solutions could help create a more sustainable and accessible housing market overall.
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Housing market activity is likely to remain “subdued in the near term” amid expectations of further interest rate hikes, according to Nationwide. While other experts in the real estate market fear that the worst is yet to come for both buyers and sellers.
By Daniel Binns, business reporter
Thursday June 1, 2023 08:20, UK
House prices fell 3.4% year-on-year in May, according to one of the UK’s biggest mortgage lenders.
Data from building society Nationwide also showed a monthly decline of 0.1%, and the average cost of a UK house is now said to be £260,736.
The building society had said there were tentative signs of a recovery in the market in a report last month.
Its April index reported a 0.4% rise in monthly prices, while the annual rate improved from -3.1% in March to -2.7%.
Robert Gardner, Nationwide’s chief economist, said the latest data “largely reflects base effects with prices largely flat over the month after accounting for seasonal effects.”
But he added: “Average prices remain 4% below their Peak August 2022.
“Recent data from the Bank of England had shown some signs of a recovery in housing market activity, although the number of mortgages approved for home purchases in March was still around 20% below pre-August levels. the pandemic.
“In addition, it appears that the headwinds in the housing market will strengthen in the near term.
“While consumer price inflation slowed in April, it was a much smaller decline than most analysts had expected.”
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Gardner said expectations that the Bank of England will rise Interest rates again, coupled with projections that they will stay higher for longer, would likely renew the upward pressure on mortgage rates.
But he thinks there are reasons to be hopeful about long-term housing affordability.
He added: “However, in our view, a relatively soft landing remains the most likely outcome, as labor market conditions remain robust and household balance sheets appear to be in relatively good shape.
“While activity is likely to remain subdued in the near term, healthy nominal income growth rates, coupled with modestly lower house prices, should help improve housing affordability over time.” .
Housing Market Faces Troubles As ‘Storm Clouds’ Gather
Alice Haine, personal finance analyst at investment platform Bestinvest, was more pessimistic.
She said: “While the start of the year saw a pick-up in market activity amid falling mortgage rates and a strong job market, storm clouds are gathering once again as interest rates and gilt yields are getting higher and higher.”
He added: “With markets now betting on more rate hikes to come, with interest rates potentially peaking at 5.5%, or worse, higher, as the Bank of England seeks to win the battle to rein in inflation, This causes problems for the real estate market.
“Changing interest rate expectations have caused big moves in bond markets, and as bond yields rise, so do exchange rates, which lenders use to price home loans.
“It means borrowers must adjust to even higher mortgage rates on top of persistently high costs of living and rising taxes.
“Over the past week, hundreds of residential and purchase-to-let mortgages have been taken off the market as lenders re-evaluated their offers.”
Gabriella Dickens, senior UK economist at Pantheon Macroeconomics, said Nationwide data for May suggested shoppers “are struggling with affordability.”
He added: “Other timely measures are also quite bearish. While our seasonally adjusted version of the Rightmove measure rose 1.4% in May, it shows asking prices, not the final price the seller accepts.
“Sellers are probably increasing their initial asking price to achieve a final price they are comfortable with… Looking ahead, we believe the downward trend in home prices has a little more run” .
https://news.sky.com/story/amp/storm-clouds-gathering-for-property-market-as-house-prices-fall-12894048
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