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A strong price rebound in the UK Housing Market since May

A strong price rebound in the UK Housing Market since May

A strong price rebound in the UK Housing Market since May

Soaring energy prices, spike in housing prices, crippling inflation and the end of easy money. These all factors indicate that a recession is on its way in the UK. For the UK housing market, it is a general forecast that a sharp correction is on its way. It seems like signs are also there, which are further mounting the pressure.

According to Bloomberg News, the value of UK houses is flat or falling in half of the city’s boroughs.

Strongest growth prediction in UK housing market

Despite negative news and falls, UK home sellers have boosted property prices at the strongest pace in four months. The asking prices rebound indicates the market is ready to shake off the impact of higher borrowing costs and the costs of living crisis.

Property prices increasing

The UK property prices increased by 0.7% in September after a 1.3% drop in August, according to a leading UK property portal. The increase in property prices is a result of higher demand from potential buyers. According to an estimate, the buyer demand is increased by 20% higher than the pre-pandemic average, while the market supply of ready homes has returned to 2019 levels.

Despite enduring the tough times, UK housing remained a positive sector playing a pivotal role in the economy and also flourishing well despite the recession imposed by the COVID-19 induced global pandemic. It is observed that rising interest rates and inflation started affecting the affordability of potential home buyers. However, the UK government announced cutting taxes on the purchase which could give a boost to the UK housing market.

“The housing market continues to be extremely resilient even in the face of the economic headwinds that are stretching household finances. “Prices are likely to remain strong while demand continues to outweigh supply,” said Tim Bannister, Rightmove’s director of property services.

The Treasury’s move to double the threshold for charging stamp duty to £250,000 means that almost a third of all homes that are currently up for sale are exempt. This step will stimulate genuine demand from potential buyers. “We could see more first-time buyers but because the change is permanent and because of gathering headwinds such as rising mortgage rates, we expect to see a more gradual increase in demand,” he stated further.

A spike in London house prices

Though prices fell in the Midlands and Wales house prices rose by 2.1 % in London in August 2022 – the strongest gain of all the regions. Notably, the London housing market was hit hard by the global pandemic, with many people moving out of the central city and shifting to the outskirts in a home with ample space for home offices. However, the trends are changing in the capital now, as it roughly takes 50 days to sell a home in the capital, last month.

Bolstering demand in the country

The mounting pressure of negative factors means that housing inflation is almost coming to an end. The property values in the UK rebounded in the aftermath of the financial crisis as a reduction in interest rates and cheap borrowing made banks keen to lend money to buyers.

The government has also added fuel to the market by bolstering demand through low-deposit loan programmes and temporary tax cuts. This has brought the home prices in England (particularly) to their least affordable ever.

On the contrary, the UK property market is on fire now. Roughly, 1.8 million people need to refinance their mortgages, while the wages are plunging and a recession appears more likely. Moreover, a low-priced source of credit will also disappear from the market.

Help to Buy programme about to end

Help to Buy” a support programme that allowed buyers to buy a property in the country with a deposit of just 5% and provided lenders with a government guarantee on part of the borrowings, will also come to an end in 2023.

According to real estate agents in UK, it will have a negative impact on first-time property buyers in London, particularly and also widen inequality within the housing market. Another notable impact is that property developers have already started pulling back on the construction of less expensive new homes in the capital. It is because “Help to Buy” was a key driver of that market for the developers to bring potential property buyers.

A spike in UK property prices

The average price of a home coming to market increased by £2,587, or 0.7% month-on-month in September to £367,760.

Price growth was concentrated in the middle and higher end of the market as property buyers planning to move up the property ladder. The asking prices for the “upper-next category” homes such as three bedroom homes or detached homes hit a new record, with an average asking price of £340,513.

The UK property market remains surprisingly resilient, despite growing economic pressure. According to Rightmove data, the new first-time buyers are paying average monthly mortgage payments of £1,057, which will increase to £1,114 a month if lenders pass on the latest half-point interest rate rise.

The change in the stamp duty can give property prices another boost, at least in the short term. The property buyers will not have to pay tax on the properties up to the value of £250,000, while the threshold for first-time buyers will be £425,000.

Resultantly, if a large number of prospective property buyers will start competing for a limited number of properties for sale in UK, there can be some unseasonal price rises over the next few months. “The first-time buyer threshold change means we could see more first-time buyers,” said Tim Bannister, Rightmove’s housing expert.

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