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Halifax HPI: “Housing market continues to defy logic” – reaction from agents and brokers

by | Jul 7, 2022

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Following the Halifax June House Price Index published this morning, a number of agents and brokers have reacted.

To read Russell Galey’s, Managing Director at Halifax, comments on the HPI click here!

Michael Aldridge, director of Bath and Chippenham-based Lucra Mortgages“Despite the growing number of doom and gloom prophecies, the housing market continues to defy logic and house prices continue to boom. Some analysts predicted the property market would be on its knees by now but despite an apparent perfect storm it still remains extremely buoyant. Without doubt, the squeeze on household spending will start to have an impact on demand and, in turn, prices, but several factors are counterbalancing this.

“Housing stock remains phenomenally low, employment levels very high and though interest rates are rising, they are still at historically low levels. Add to this a surge in demand for holiday lets and second homes, coupled with the rush from first-time buyers to get onto the ladder ahead of the looming help-to-buy deadline, and I believe the market will remain strong until the end of the year at least. Beyond this, with further rate rises very likely and the jump in the energy price cap in October, then next year could be when any marked slowdown occurs. Even then, I certainly wouldn’t predict a crash.”

Imogen Sporle, Head of Term Finance at London-based broker, Finanze“Despite this extraordinary data, it’s not a case of if house prices crash but when. Whether the full crash happens this year or next, it’s coming. Demand in the property market will cool due to painfully high inflation. Inflation is the property market’s nemesis and is hitting sentiment for six. Lenders becoming more conservative with affordability is sensible in the current climate but of course this will mean people can borrow less, which means sellers may soon have to price lower. Even then people may struggle to purchase properties in the current climate, whether financially, psychologically or both. There are tough times ahead.”

Charles Yuille, managing director of Bath-based Willow Brook Mortgages: “The property market has passed beyond surreal, that much is for sure, with prices in the South West in particular moving full steam ahead. Though we will almost certainly see a moderation in the rate of house price growth in the second half of the year, the egregious lack of stock will prevent any material drop in house prices. The cost of living crisis is definitely hitting wallets and confidence hard but for now the employment market remains strong. However, we are in a highly volatile market, economically, geo-politically and on the domestic political front. Chaos in the House of Commons has the potential to hit sentiment.”

Rob Gill, founder of London-based Altura Mortgage Finance: “Having posted double-digit growth during a global pandemic, it’s a brave person who bets against the UK property market. There’s every chance house prices will shrug off war in Europe and the cost of living crisis, albeit with more modest growth, especially as property has always been a good inflation hedge.”

Ross Boyd, founder of the always-on mortgage comparison platform,“The property market is on a plane of its own, answering to its own rules and logic. It consistently cocks a snook at economic reality. Economic conditions have deteriorated significantly in the past few months at the same time as interest rates have risen and yet the property market is booming. More rate rises are almost certainly on the cards as the Bank of England attempts to control inflation. It’s inconceivable to think the housing market will remain unaffected by the current interest rate cycle..

“The property market will continue to cool throughout 2022 and in 2023. When they come to remortgage, it will be less a case of rate shock for many borrowers but rate trauma. The pending remortgage crunch will significantly add to the cost of living crisis. The cost to rent has hit another record high and that will drive a degree of demand as people seek to get onto the ladder.”

Andrew Montlake, managing director of the UK-wide mortgage broker, Coreco: “More insane, economics-defying growth from the UK housing market. It’s like bricks and mortar in The Upside Down. Inflation is soaring, rates are rising, our government is in chaos and house price growth is off the scale. Despite this exceptional growth figure, increased borrowing costs and the immense pressure on household finances will almost certainly start to temper demand in the months ahead, which will see the rate of price growth slow further during the second half of the year. The one constant in these times of flux, of course, is the lack of supply and homes being built. The abject lack of good quality, affordable housing will support prices even as we go through an unprecedented cost of living crisis.”

Graham Cox, founder of the Bristol-based broker, “I’ll be surprised if house prices aren’t falling by the end of the year at the very latest. We’re noticing more people holding off buying now, spooked by the economic outlook, higher mortgage rates, and the expectation that property prices will soon fall. We’re also likely to see more distressed sellers, unable to afford the mortgage alongside other debts and all the other cost of living increases. A long, deep recession could turn a trickle of forced sellers into an avalanche.”

Scott Taylor-Barr of Shropshire-based broker, Carl Summers Financial Services: House prices don’t tend to crash without mortgage finance drying up first. It’s never that people don’t want to buy property, it’s that they aren’t able to that stifles demand. So, without there appearing to be any reason on the horizon for banks to suddenly stop lending, where does that leave property prices? My best guess is that we’ll see prices plateau in the coming months, with a period of little or no growth, with some areas even seeing small negative growth numbers.

“This is mainly due to us starting to reach the top of lenders’ affordability models. People want to move but when we calculate the size of mortgage their incomes generate, they end up short on the property they ideally want to move to. And let’s not forget rapidly dwindling confidence as fears over the cost of living and increasing interest rates dominate the headlines.”

Andrew Simmonds, director at Bristol-based Parker’s Estate Agents: “The right properties valued at the right level will always sell. Unfortunately, vendors have seen the market grow exponentially over the past few years and, more often than not, are asking to list their property at a slightly over-egged asking or guide price. We are seeing valuers down-value properties more often than not, but as a rule anyone who challenges a valuation with strong evidence does tend to turn a valuer’s perspective. We are seeing more stock enter the marketplace than we have experienced in the past 12 months, but buyers are now contracting back into their shells a little. The rest of 2022 will be interesting. I certainly do not see the same growth as previous years, perhaps fairly static values and certainly not prices falling, at least not yet.”

Robert Payne, director of Bristol-based Langley House Mortgages: “While the unsettling combination of inflation, rate rises and the war in Ukraine suggests we are heading towards troubled waters, the property market has continuously shone through uncertainty and my prediction is that we will see more of the same. I do think we will see adaptive behaviour from homeowners as many have borrowed to their maximum capacity on the lowest interest rates in our history so they may start to struggle with increased payments on rates, which have since doubled.

“One particular change I think we may see is borrowers asking to lengthen their mortgage terms to reduce the monthly payments. I also think we may see an increased number of owners requesting consent to let their property and moving back in with family, rather than climbing the property ladder as they would have done previously.”

Jamie Lennox, director at Norwich-based mortgage broker, Dimora Mortgages“Though there is still demand, a growing number of buyers are putting their plans on hold due to the uncertain economic and political climate. We’ve got fireworks in Government at the same time as the economy is under a huge amount of pressure. The main threat to the housing market is the rate at which lenders’ fixed rate deals are increasing right now.

“Customers we quoted at the beginning of the year who are now revisiting the idea of buying are finding that that same mortgage they could have got six months ago is going to cost them hundreds of pounds per month more, which has then priced them out of a purchase. The balance of power between buyers and sellers is certainly shifting, with buyers using fears around the economy as leverage in their offers. This week we had a number of clients’ chains nearly collapse at the eleventh hour as buyers decided they were overpaying for the property and wanted a huge reduction on the agreed purchase price.”

Joe Garner, managing director at London-based property developer, NewPlace:Lenders are tightening up on affordability checks, the cost of living has increased sharply and the jobs market is flatlining, which should be a recipe for house prices to tumble. However, this isn’t the case, for now at least. What matters is whether inflation is at the peak or still getting warmed up. The average price of a new home in Coulsdon, Croydon (Zone 6 of London) is now an eye watering £540k with detached properties selling for an average of £770k. With a 10% deposit plus stamp duty, first-time buyers will need a deposit of £54k and stamp duty of £17k. That is £71k in cash required to buy an average house in Croydon for a first-time buyer. It’s insane. Mortgage affordability is becoming increasingly difficult to achieve for young, first-time buyers due to the dramatic rise in the cost of living.

“An average salary in the London Borough of Croydon is £35k. In the first-time buyer bracket, this drops to £30k. Without Help to Buy or any other financial assistance, the average first-time buyer can afford to borrow between £120k and £150k, which would mean a deposit requirement of £390k. How is this sustainable or achievable? It is likely we will see a big shift towards a New York style ‘rent before you buy’ model that will see a mass movement of 20-30 something year old first-time buyers into build to rent, private rent and co-living schemes. This has the potential to completely re-invent the housing model, market and prices for generations to come.”

Mark Robinson, Managing Director of Southampton-based Albion Forest Mortgages: “I am expecting house prices to continue to rise over the next 12 months, but almost certainly more gradually than in previous years. Our June figures show an increased level of enquiries as well as an increase in mortgage offers, so people are certainly still buying, often driven by a desire to escape the rental market, where rents are stratospheric.”

Imran Hussain, director at Nottingham-based Harmony Financial Services“Despite the crazy June data, property prices are almost certainly going to stabilise by the end of the year with minimal growth, especially with the cost of living rising once again in October. I don’t expect any noticeable increase in house prices for the rest of the year but equally I don’t expect a material drop either, as activity levels remain fairly strong and demand still outstrips supply.

“The main threat to property prices will be employment levels as the cost of living is already spiralling out of control and a surge in unemployment will put property prices under pressure. Though recent rate rises rate were meant to slow or curb demand in some people’s eyes, all it’s done is got rid of the dreamers meaning the serious buyers can crack on with business. Though some sellers are still being unrealistic on price, a properly priced property flies quicker than a toupee in a hurricane.”

Paul Neal of Derbyshire-based Missing Element Mortgage Services: “It’s still a busy market out there and that’s reflected in this latest record-breaking house price index. Many people are waiting in the wings for prices to come down, so we are expecting a flurry of activity again in the latter states of the year.The boiling pot that has been the property market for the past two years is finally reducing to a simmer. The market is beginning to slow and we are seeing lenders up their rates across the board.

“Expect to see a flurry of first-time buyer activity in the months ahead with the Help to Buy scheme due to end in October, although with lenders tightening affordability it’s becoming harder than ever for generation rent to get on the ladder. Rates are almost certainly set to increase, but we don’t need to panic as they are still low historically. The lack of stock will continue to support house prices through the cost of living crisis. What we desperately need is more affordable housing stock, not stock that is snapped up by landlords or builders to make a fortune on. Reliable, affordable housing for everyday people.”

Dominik Lipnicki, director of Your Mortgage Decisions: “With such limited supply, the housing market remains robust, but price increases are set to be a lot more modest by the end of the year. Inflation, higher taxes as well as the anticipated October hike in energy prices will dampen demand. Rising mortgage rates have already diminished affordability for many borrowers and this will only get worse as the year progresses. Lenders are already being cautious around affordability and this approach will only become more conservative as the year progresses. The danger of a possible recession or stagflation would of course change the outlook and would shift the balance of power to buyers.”

Sabrina Hall of Lichfield-based Kind Financial Services: “The market is still strong but it’s looking like we are seeing an end to the craziness of one property getting 20 to 30 views and resulting in a bidding war. Despite the cost of living crisis and the restrictions on affordability I’m still seeing a lot of demand from house buyers and it doesn’t seem to have put buyers off up till now so this will help to keep the mortgage market from crashing. I expect by the end of the year we will be on our way to seeing some correction of the boom that happened during Covid.”

Lewis Shaw, founder of Mansfield-based Shaw Financial Services: “The answer to the direction of house prices may well lie with the Halifax, specifically the fact that they have just increased their exposure to new builds to 95% LTV across the board. Until now, almost every mainstream high street lender would want a minimum of 15% deposit for a new build house. Since Halifax has now reduced the minimum deposit to 5% on new builds, they must think or know something we don’t, namely house prices aren’t going anywhere anytime soon.

“This move by one of the best and most well-respected lenders in the UK should give everyone pause for thought. Moreover, it should give added confidence in the property market, mortgage market and the economy more generally. It opens up thousands of smaller developers and developments to a far greater first-time buyer audience than was possible before and sidesteps requirements to use any weird and wonderful schemes. To me, this move in itself signal things may just be alright. Also, let’s not forget we are still facing the lowest stock levels since records began, which will continue to support prices.”

Edward Checkley, managing director of London-based property finance specialists, Advias:It is hard to see how there will be a property crash when the shortfall in property stock remains a constant problem. Though rising interest rates are tempering buyers’ enthusiasm, in historic terms borrowing costs still present reasonable value. Looking forward to 2023, should inflation not fall and interest rates continue to rise, property values may see a correction to compensate for additional finance costs. However, this may not be the case if inflation eases and interest rates remain relatively attractive. We may see short-term corrections in regional locations, where buyers fought over idyllic property and areas during the pandemic. A compensating factor for the market in general may be the relatively weak pound and the international appeal of London, which may entice foreign property investment into the capital.”

Anthony Lomas, partner at Derby-based estate agents, Boxall Brown & Jones: “We don’t see prices falling, simple economics would suggest with lowering supply and a frustrated pool of demanding buyers, prices are likely to continue to grow. It feels like it will be a while before the demand is satisfied. I think it waits to be seen if buyers have “paid over the odds.” It was clearly necessary to secure the house they wanted. Chances are, they could currently sell their house for more. If the market does cool and buyers have no need to sell, time should auto-correct any negative equity.”

Marcus Wright, MD of Bolton Business Finance: “The fate of the housing market is in the hands of the Bank of England. Average mortgage rates have already shot up in the past six months due to base rate rises and could go up further. The simple fact is that the higher interest rates go, the less people will be able to borrow due to affordability criteria. This will inevitably hit house prices if Threadneedle Street ploughs ahead with more rate rises to contain inflation.”

Rhys Schofield, managing director at Belper-based Peak Mortgages and Protection: “House prices are still going to be higher by the end of the year, as the data we see now is based on what value house sales were agreed five months ago and that will take time to feed through. Demand is still very much there and the drastic shortage of property stock just keeps driving prices up. We still have a shortfall on UK housing stock of about 4 million properties so until that changes, which seems incredibly unlikely given the track record of successive governments, the inflationary pressure on house prices will not subside.”

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