Over recent weeks the forecast has been described as stormy, chilly, cooling and even turbulent.
No, not the weather forecast - these are descriptions of the state of the housing market.
The fall-out from the mini-budget terrified lenders and left buyers struggling to find an affordable mortgage deal. Thousands of loan products were removed from the market and interest rates rose accordingly.
Then the Nationwide House Price Index indicated a slight drop in prices for October of 0.9% month-on-month and the media vultures began to hover.
Those who can afford it are still shopping around for the best deal, while those who feel they may struggle with higher rates, might well decide to hold off on committing in case prices ‘cool’ further.
But what is really going on behind the headlines? One thing is certain, demand for homes continues to outstrip supply if the price is right and the finance is in place.
Everyone agrees there is still a need for thousands more affordable, quality homes. But housebuilders are reporting yet more difficulties. And according to the National Association of Property Buyers’ spokesman, Jonathan Rolande: “it’s enough to make your head spin.”
He said: “In the last few months we’ve had a target of 300,000 new homes, then no targets, then Michael Gove was sacked and reinstated. Now the target is back on the table.”
And as if that wasn’t enough, he went on to list the reasons why the house building market has entered a period of decline.
The cost of materials, he says, is rocketing: price of bricks up 12%, concrete up 37% and steel up 50%.
And even if they could afford the higher prices for materials, the houses still couldn’t be built because there is a skilled labour shortage.
In short, the buyers can’t afford to buy because of high interest rates, the sellers can’t afford to drop their price because of inflation and the developers can’t build because (among other things) there aren’t enough builders.
It’s all a bit of a problem, really, isn’t it?
Not necessarily, according to Richard Campo, founder of mortgage brokers, Rose Capital Partners, who believes that any fall in house prices could be more accurately seen as a correction rather than anything more significant – particularly in London and the South East.
Smaller loans
And, if we dig deep into the housing market over the last few years, have we really enjoyed the housing bubble that is so regularly talked about?
New figures show that prices in London rose by just 3.9% between 2021 and May this year, following falls during the pandemic. But in Aberdeen, prices have fallen by 2% over the last 12 months. And while the South has seen considerable price increases year on year, the North East has had rises of less than 1%.
But while over 50% of people own their homes outright and are therefore unaffected by hikes in mortgages, some recent buyers could find themselves over-stretched if interest rates continue to rise and the cost-of-living crisis deepens.
And as the government tries desperately to steady the ship, there are already signs that the hysteria that has been heaped on the housing market is gradually subsiding.
We leave the last words to Mr Campo.
“We’re likely to see interest rates continue to rise well into 2023, although they will probably top out at around 4.5%, rather than close to 6%, as feared a few weeks ago. As we adjust to living in a higher interest rate environment, lenders will potentially lend smaller loans in 2023, so even if house prices fall, loans will be smaller plus they’ll be charged at a higher interest rate. Meaning that first-time buyers will be worse off the longer they leave it.
“My suggestion would be that, if a first-time buyer has a property in mind and the funds in place, the sooner they make their move the better. If they’ve found their property but are still searching for the right mortgage, they should speak to an experienced mortgage broker who will be able to search the whole market.”
At Kings Group, we can offer you sound, realistic market advice and help you to get the most from your sale.
For more information on how we can assist you on your selling journey, please contact one of our branches in Essex, London or Hertfordshire today.
We also offer a free and instant online valuation to give you an idea of how much you could sell your home for.
