Following today’s Halifax House Price Index industry experts have reacted and shared their thoughts with IFA Magazine.
Graham Taylor, Managing Director at Hudson Rose said: “It is no surprise that house prices are continuing to fall given the increases in interest rates over the last 12 months or so. Many commentators have predicted a drop of around 10-12%, peak to trough. Whilst predicting house prices can be a ‘fools errand’ it would be brave to assume that they are not going to drop further.
“Assuming that discretionary spending from borrowers hasn’t increased too drastically, the mortgages arranged during the low rate period would have been stress tested against such higher rates and this should provide some comfort. The difficulty is that the rate increases have come at a time when other costs have ramped up squeezing homeowners further thus decreasing the demand.
“It is not all doom and gloom though, as Halifax reported last month, the effect of decreasing prices coupled with increases in income have made the average house price to average income ratio fall from 7.3 x last summer to 6.7x. This should help a little but access to deposits remains a stumbling block for many.”
Managing Director of Barrows and Forrester, James Forrester, commented: “Such a sharp annual decline will certainly spur panic amongst the nation’s homebuyers and sellers at first glance. But it’s important to remember that this time last year the market was flying high at the peak of the pandemic price boom, so it would have taken a monumental spike in market activity this time around to avoid an annual decline in property values.
It’s also important to note that August is peak silly season in the UK property market and so there is very much a seasonal influence at play here. Buyers, sellers and property professionals alike will have taken time off for their summer breaks, the result of which is a reduction in market activity and a more sluggish rate of house price growth.”
Director of Benham and Reeves, Marc von Grundherr, commented: “What goes up must come down. What we’re now seeing is the market ‘return to normality following the sustained levels of house price growth spurred by the stamp duty holiday at the start of the pandemic.
This decline has been intensified by additional factors such as the consistent increase in interest rates and the increased cost of borrowing, however, we don’t anticipate this drop to be the tip of the iceberg.
House prices remain far higher than they were pre-pandemic and it would take a substantial market crash to reverse this. Given the overall health of the market, this simply isn’t on the cards.”
Managing Director of House Buyer Bureau, Chris Hodgkinson, commented: “Buyer indecision continues to dampen market sentiment, with the majority still unwilling to borrow the sums required to satisfy seller expectations. As a result, property values have continued to level out as predicted and this will remain the case until a middle ground is reached.
For sellers, this means a further adjustment where their asking price expectations are concerned if they want to secure a buyer. However, the required adjustment is marginal in comparison to the house price increase they will have enjoyed over the last few years.”
Kate Steere, deputy editor and mortgage expert at personal finance comparison site finder.com said: “It’s extremely concerning to see another significant decline in house prices during August. The UK housing market is currently at risk of a crash, and with another base rate hike largely expected at the end of this month, house prices are set to take another hit.
“The recent growth in UK wages along with lower house prices should be a perfect combination for those looking to buy, but the benefits of these conditions are currently offset by the extremely high mortgage rates we’ve seen over the last 12 months. The threat of significantly higher monthly payments has knocked buyer confidence, and created a downward spiral in housing prices.
“I’m hopeful that we are nearing the peak of interest rate rises, and following the announcement in September, the Bank of England might look to pause rate hikes moving forward. This would allow the market room to breathe and begin to restore some buyer confidence. However, until this happens, I expect that house prices will remain low.”
Nicky Stevenson, Managing Director at national estate agent group Fine & Country said: “The rise in borrowing costs combined with traditional summer slowdown have put the brakes on house price growth, although average prices remain well above pre-pandemic levels.
“The number of properties available for sale remains constrained compared to 2019, which was a fairly typical year for the housing market. This is playing a part in preventing bigger falls in prices even though affordability is tight.
“While demand has slowed over the summer, this matches normal seasonal patterns and is expected to build again as we head into autumn.
“Mortgage lenders are competing for business again and bringing down their mortgage rates accordingly, which will ease pressure on home-buyers and will further prop up demand over the coming months.
“If a pause in base rate rises does materialise this year, this should further boost buyer confidence.”
Jonathan Hopper, CEO of Garrington Property Finders, comments: “Despite the emergence of some prematurely optimistic voices, this is no passing wobble for the property market.
“The reason is affordability. Interest rates have risen a lot and average house prices have come down a little – at least compared to how high they were. With this monthly drop, questions will be asked about the rate of descent, and whether we’re still on course for a soft landing.
“The rising cost of mortgages, and the reduced amount of money that would-be buyers can borrow, have not been sufficiently offset by falling prices.
“As a result, some buyers who need a mortgage to fund their purchase are either postponing things in the hope prices fall further, or looking for a smaller home in a cheaper area. Meanwhile at the top end of the market, cash buyers sense that their hand is getting ever stronger.
“Those with a decent amount of cash behind them can afford to be more pragmatic in how they structure their finances and their house-hunting strategy. And while everyone is wary of paying a price now that might be lower in six months’ time, committed, proceedable buyers find themselves in a commanding position as sellers now regularly accept offers well below asking price.”
Tomasz Wieladek, chief European economist at T. Rowe Price said: “UK house prices will continue to fall at a sharp rate, with the point of greatest pressure for the market still ahead of us. A peak-to-through decline of 15% is the most likely outcome in my view, while a 20% drop is possible in a more adverse scenario.
“House prices will continue to fall at a rapid rate well into next year for a number of reasons. Clearly, the cost of a mortgage has increased sharply with the Bank of England’s policy rate. Although mortgage rates have come down a little from the peaks, the mortgage payment increase for anyone refinancing today compared to two years ago will be huge. Among all the other pressures from higher inflation, this will put significant pressure on households.
“Unfortunately, I think the worst may still be yet to come for the housing market. The unemployment rate has begun to rise from a low of 3.5% in mid-2022 to 4.2% now. The latest data show the rise in the unemployment rate has accelerated significantly in recent months. The Bank of England needs the unemployment rate to rise to at least 6% to squeeze inflation out of the labour market. Historically, it was a higher unemployment rate that led to mortgage defaults and the most significant adjustment in house prices.
“Because the unemployment rate will keep rising, mortgage defaults will likely rise, which is when the housing market will be under the most pressure in this cycle. This moment is still ahead, not behind, us. With wage and price inflation still very high, the Bank of England will not come to the rescue any time soon, as it needs greater slack in the labour market to squeeze wage inflation out of the economy. Instead, rates are more likely to keep rising given the latest inflation data.”
