UK property market goes down the rabbit hole

by | Mar 7, 2022

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There’s surreal and there’s the UK property market, which takes surreal to a whole new level. Imagine Dali, on angel dust.

The Halifax house price index for February delivered monthly price growth of 0.5% and annual growth of 10.8%, the strongest level since June 2007, just before CDOs KO’d the entire banking system and the Global Financial Crisis took grip.

Average prices rose to another new record high of £278,123, with supply, according to Russell Galley, Managing Director at the Halifax, the key driver: “Lack of supply continues to underpin rising house prices, with recent industry surveys showing a dearth of new properties being listed, now a long-term trend.”


Looking forward, Galley understandably struck a cautious note, noting geopolitical events are exposing the UK to new sources of uncertainty: “The war in Ukraine is a human tragedy, but is also likely to have effects on confidence, trade and global supply chains. Surging oil and gas prices are one immediate consequence, meaning that inflation in the UK – already at a 30-year peak – will remain higher for longer.”

This, coupled with rising interest rates, Galley continued, “will add to the squeeze on already stretched household incomes. These factors are likely to weigh on buyer demand as the year progresses, with market activity likely to return to more normal levels and an easing of house price growth to be expected”.

That’s the theory at least. The reality, according to Lewis Shaw, founder of Mansfield-based independent mortgage broker, Shaw Financial Servicesis that the UK property market is on a different continuum: “The UK property market has gone down the rabbit hole. In a harsh climate of rising interest rates, raging inflation and impending National Insurance tax hikes, the property market dances to its own tune and prices continue to rise. Economic logic suggests prices should be coming down but the surreal lack of stock is keeping values buoyant.”


Ross Boyd, founder of the always-on mortgage comparison platform,, also pointed the finger for the dreamlike rises in property prices at supply: “The lack of supply is less a long-term trend than a law of the UK property market. Equally, demand is still rampant, despite the economic fundamentals suggesting it shouldn't be. The major challenges facing the market right now are a scandalous lack of stock, interest rate rises, the surging cost of living and the tragic war in Ukraine. Against this backdrop, the market is likely to slow as we progress through the year.”

Andrew Montlake, managing director of the UK-wide mortgage broker, Coreco, was of much the same view: “Interest rates are set to rise further to bring inflation to heel, tax hikes are getting ever closer and energy and grocery bills are going through the roof. Moving forward, it's likely that people's borrowing power will wane as lenders take into account these extra costs and that will cause the market to cool down.”

Marcus Wright, MD of property broker, Bolton Business Finance, also singled out inflation, and the war in Ukraine, as a major threat: “Overall, the outlook remains oddly positive amid the cost of living crisis, but if inflation continues on its upwards trajectory, things may well change. Any escalation of the war in Ukraine could also impact the market.”


Graham Cox, founder of the Bristol-based broker, Self-Employed Mortgage Hub, was significantly more bearish: “Though this latest house price index suggests the show goes on, the reality is that, for the UK property market, the show may soon be over.” Jonathan Burridge at hybrid broker, We Are Money, also expects reality to kick in, and soon: “We have many of the ingredients in the pot for a significant recession. There is a storm brewing.

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