Following the May Land Registry house price index published this morning, industry experts have shared their thoughts about the data with IFA Magazine. It’s been a busy morning of data with the latest CPI inflation figures reported and also the ONS Index of Private Housing Rental Prices
Commenting on the Land Registry data:
Russell Maggs, mortgage adviser at Corsham-based Maggs Financial Services said: “Annual house price growth continues to edge down, which is unsurprising given the rate rises we have had. Average values are likely to continue to fall given the current level of mortgage rates. Despite Wednesday’s positive inflation data, we could still see the Bank of England increase rates again, which will further impact sentiment. Buyers need the time to get used to the higher interest rates we now have. However, the lack of supply should ensure property values don’t plummet as some have predicted. As people’s mortgages increase, the knock-on effect will be felt by borrowers with unsecured credit, who may find it more difficult to renegotiate 0% credit card deals and struggle with other payments while prioritising keeping the roof over their heads.”
Vikki Jefferies, Proposition Director at PRIMIS, comments :
“The ONS House Price Index figures demonstrate the resilience of the mortgage market, as house prices increased by 1.9% in the 12 months to May 2023, albeit down from a revised 3.2% in April 2023. Today’s inflation figures also spell good news for the market, as the lower-than-expected rate of inflation increases the likelihood that the Bank of England will only raise its base rate by a quarter point next month. Any interest rate rises, however incremental, will continue to put downward pressure on house prices during the coming months, as volatility in the market looks set to persist.
“However, it is important to note that despite increased mortgage rates, sales are still going ahead and there remains a steady pipeline of mortgage applications to underpin market activity. For buyers looking to secure the most appropriate rates, there still remains a large volume of mortgage products on the market across a range of two-, five- and ten-year fixes – significantly more than in the wake of September’s mini-budget. Lenders are also aware of the pressures facing buyers in terms of affordability, and are constantly innovating to develop products to suit a range of circumstances and borrowing needs.
“There also remains a variety of tools at brokers’ disposal to assist buyers who are concerned about finances. For example, borrowers who meet eligibility requirements may be able to switch onto interest-only mortgages, or increase the term length of their mortgage, reducing monthly payments in the short-term. Such solutions show the importance of seeking professional advice in today’s economic climate, as brokers remain an invaluable source of information and support to both new buyers and those remortgaging.”
Paul Glynn, CEO of Air, comments :
“Given recent developments in the mortgage market, the slight flattening in May’s figures was to be expected. A gradual slowdown and a levelling out in house prices after the historic peaks of 2021 isn’t quite a cause for alarm. It is true the market outlook has been clouded by increases to the Bank of England base rate, but these efforts should act as a counterweight, pulling inflation downwards to a more manageable level.
“What matters most in the current flashpoint is that concerned consumers who read the forecasts have informed and proactive advisers to support them as they tackle these challenges. Affordability will continue to present a long-term challenge to both younger borrowers looking to step onto the ladder and older borrowers facing the prospect of ballooning mortgage repayments ahead of retirement.
“Now is not the time for borrowers or their advisers to follow well-worn paths without considering all their various options – whether these are taking advantage of the Government’s new measures or considering later life lending products. Being proactive is important and those who do so will benefit in the long term.”
Stuart Crispe, founder at Sunny Avenue said: “Given all the rate rises we have had over the past year, downward pressure on house prices was inevitable. Even after Wednesday’s better than expected inflation data, inflation needs to drop further and the base rate to stabilise or come down before the property market once again starts to rebound. We could see a rise in buy-to-let investors leaving the market, as well as those who cannot afford to keep their homes putting them up for sale. Though the lack of supply will likely prevent a collapse in prices, more buy-to-let properties coming onto the market in particular will put further downward pressure on prices.”
Riz Malik, director of Southend-on-Sea-based independent mortgage broker, R3 Mortgages: “The direction of annual price growth is down. The primary catalyst to revive the UK housing market will either be a reduction in interest rates or a decrease in prices, with the latter the more likely scenario in the short term. Trust has significantly eroded and without a fall in interest rates, it will necessitate price reductions to encourage people to take action. However, the moratorium on repossessions as stated in the mortgage charter is expected to prevent a precipitous drop for at least the next year. This is because properties that would have previously been repossessed will not come onto the market. Just as with the economy, the UK property market is likely to remain in a state of stagnation.”
Malcolm Webb, Technical Director at Legal & General Surveying Services, said:
“It may seem that the UK housing market has entered a turning point. However, considering the full context of these price variations is important. UK house prices have enjoyed decades of growth, reaching all-time highs during the immediate post-pandemic period. As such, any drop in house prices seen today should be considered something more of a levelling out in asking prices.
“The reality is that there’s still a sizeable discrepancy between available housing supply and market demand, keeping upwards pressure on prices – especially in certain areas of the UK. Nevertheless, we should remember that house prices can vary significantly by region, so homeowners should always seek advice from a local expert to scope out their available options.
“While the cost-of-living crisis and high house prices have created ongoing affordability challenges for would-be buyers, there are still good options available, with some prospective buyers shifting their attention to smaller homes instead. For would-be borrowers in this position, getting a home survey is key to making a well-informed decision. Should a surveyor report any defects that could require expensive repairs, buyers can use the report as a renegotiation tool and ensure they really are getting a fair asking price.”
Ranald Mitchell, director of Norwich-based independent mortgage broker, Charwin Private Clients: “Land Registry data is one of the best barometers for transactional data as it includes cash sales, which lender indices fail to capture. The second half of this year may see a slight reduction in property listings but with demand for housing some 48% stronger than pre-pandemic levels, more people will be slogging it out for fewer properties, which will support prices. There will be many stuck on legacy variable rates with zero mortgage options who will decide to throw in the towel and market their property, however, this is a relatively small group. I doubt there will be a property crash. Expect seasonal variations, and people under pressure to sell cutting prices for speed and ease but other than that, I would expect the market to flat line. Those who have been subjected to increased mortgage interest are making the necessary adjustments to their overall expenditures, and selling their homes just because it costs more is far from the forefront of their minds.”
Jonathan Hopper, CEO of Garrington Property Finders, comments:
“The oil tanker is turning but only slowly, and the price falls seen in 2023 haven’t yet cancelled out the momentum built up at this time last year.
“In July 2022, annual house price inflation peaked at 14.1%, seven times faster than the meagre 1.9% recorded this May. With sellers now repricing across the board, the direction of travel is clear and it’s only a matter of time before the official statistics catch up.
“On the front line we’re seeing buyers adjust their budgets as rapidly rising interest rates force them to recalculate what they can afford. While this is prompting some discretionary sellers to pause their selling plans, a clear pattern is emerging among movers who need to sell.
“Most are opting to swallow the bitter medicine of a price cut early, rather than asking an optimistically high price only to have their home sit on the shelf unsold and then be forced into a bigger price reduction later.
“However they’re then seeking to soften the blow by negotiating very aggressively on the price they pay for the home they’re buying.
“This is creating a cycle of gradually falling prices and thus strong buying opportunities for strategic buyers who are willing to focus on longer-term value rather than just what might happen in the coming months.
“While further softening of prices is likely, two factors could make it more gentle than previously thought – the supply of homes for sale is shrinking and today’s sharper than expected fall in consumer inflation might prompt the Bank of England to pause interest rate rises.”
Stephen Perkins, managing director at Norwich-based Yellow Brick Mortgages: “The UK residential property market will see a much-needed price correction during the second half of the year. This data is just the start. With lots of properties coming to market and fewer buyers able to afford them due to mortgage rates and other cost-of-living pressures, it is now very much a buyers’ market, with plenty of properties to choose from, and those most keen to sell are likely to reduce their asking price to secure a buyer. I do not believe price falls will be as drastic as the 25% drop some have suggested, as there is still an overall shortage of properties in the UK despite the increased number of properties coming to market, following many successive years of not building enough houses. As more and more borrowers come off their low fixed deals into the new rate reality, there will be many keen to sell and downsize to help reduce their outgoings and stay afloat.”
Ross McMillan, owner at Glasgow-based Blue Fish Mortgage Solutions: “Typical seasonality alongside current uncertainty and rate volatility means the volume of property transactions will almost certainly be down for the remainder of 2023 but sentiment significantly influences market performance, and scaremongering about house price crashes may well perpetuate itself if unopposed. The actual situation in the UK housing market suggests that the imbalance between supply and demand will likely lead to only a moderate softening of prices in the second half of 2023 rather than any significant level of house price armageddon. A moderate national decline of 5%-10% in house prices was widely predicted at the start of the year by many and broadly these forecasts seem to be where things are heading. In Scotland, signs of a slowdown in some areas can be found but Home Report values are typically still being achieved and supply remains limited so apocalyptic predictions of 25% price drops appear ludicrous with a flat second half of 2023 more likely.”
Director of Benham and Reeves, Marc von Grundherr, commented:
“The pandemic property rollercoaster ride has certainly ground to a halt so far in 2023, but rather than the market coming off the rails, what we’re now seeing is house prices returning to pre-pandemic levels.”
Managing Director of Barrows and Forrester, James Forrester, commented:
“Many buyers and sellers remain in property market limbo at present and it’s become a bit of a waiting game on both sides. Buyers are waiting to see if mortgage rates level out in order to boost their purchasing power, while sellers are hoping that they will achieve a better price once the economic storm clouds have passed.”
Managing Director of House Buyer Bureau, Chris Hodgkinson, commented:
“We’re currently seeing the scenario that many predicted towards the backend of last year, whereby the market is at a bit of a standstill. House prices aren’t crashing by any means, but a drop in market activity has also caused them to stall.
For those who are looking to sell, a good price is still very achievable, it’s finding a buyer who is in a proceedable position that is the biggest challenge at present.”
Jason Ferrando, CEO of easyMoney commented:
“Inflation has finally started to subside and while we’re not out of the woods yet, this should bring an air of optimism to the nation’s homebuyers and sellers.
The market remains in good health all things considered and once mortgage rates start to fall this should rejuvenate buyer appetites, delivering a much needed boost of market activity which in turn will help cultivate property values once again.”