Despite the general doom and gloom around the UK economy, the housing market continues to buck the trend. According to the Nationwide House Price Index, house price growth was up again in July, standing at 11% compared to 10.7% in June. After considering seasonal effects, prices rose 0.1% month-on-month, representing the twelfth successive monthly increase.
Since the market reopened after the first national lockdown, prices have boomed. This was fuelled largely by the stamp duty holiday and the mortgage guarantee scheme. The Rightmove House Price Index shows the average asking price reached £369,968 in June, a record high.
Why are prices still increasing?
There are several factors that are continuing to push prices up. Low unemployment is a contributing factor and the main factor that continues to push prices up is the shortage of housing stock. For some time now simply not enough houses have come onto the market to meet the demand. This means first time buyers can’t find properties and prospective sellers can’t find suitable places to move to. There are indications from estate agents that listings are beginning to pick up now, which should ease this pressure and slow down prices increases. Despite the recent rise in interest rates, the base rate is at 1.75%, low by historic standards.
When Covid restrictions were lifted last year, there was a sense that life would revert to “normal”. This hasn’t been the case in many areas of life and the economy, and the housing market is certainly one of these.
Will prices continue to rise?
There is a debate over how long the market can stay this strong. There is a growing feeling that the cost-of-living crisis will begin to make an impact soon. As of 10th August, the inflation rate stands at 9.4%, the highest it has been for 40 years. With many people already feeling the squeeze on their finances, demand is expected to fall. Rightmove has stated that the combination of this and more properties coming onto the market is likely to see prices fall slightly in the second half of 2022.
Affordability becoming an issue
While house prices have been rising rapidly over the past few years, wages have grown at a much slower pace. This has increased the house price income ratio significantly. According to the Halifax, between the beginning of 2020 and the end of the first quarter of this year, house prices rose by 16.8%. Over the same period, average incomes increased by only 2.7%. This means the cost of buying a typical home in the UK is now 7.1 times average earnings, its highest ever level.
At Springtide Capital our experts monitor all market indicators closely, helping clients to find the best possible options for their circumstances, considering not just what’s happening now but what is likely to happen in the future. Speak to us today to see how we could help you find the solution that’s right for you.
To discuss your mortgage requirements today contact Springtide Capital on 020 8154 7280.