Property Investment

What Property Crash? UK Property Prices Back on the Increase

After six consecutive months of decline, UK property buyers and investors can finally see a glimmer of hope after new research revealed a noteworthy turnaround in the UK property market, defying the gloomy predictions of a property market crash.

A positive month-on-month shift 

This month’s data from the Halifax house price index saw the average house price in the UK rise +1.1 per cent in October, a significant recovery from the -0.3 per cent dip in September.

This increase sees the price of a typical UK home now standing at £281,974, around £3,000 more than the previous month.

Annually, according to Halifax’s data, there was still a -3.2 per cent decline, however, this is an improvement from last month’s -4.5 per cent.

Kim Kinnaird, Director, Halifax Mortgages, said: “Prospective sellers appear to be taking a cautious attitude, leading to a low supply of homes for sale. This is likely to have strengthened prices in the short-term, rather than prices being driven by buyer demand, which remains weak overall.

 Across the medium-term, with financial markets not anticipating a decline in the Bank of England’s Base Rate soon, we expect house prices to fall further overall – with a return to growth from 2025.”

Experts predict housing market crash will be averted

In further news, an expert panel of academics, economists and mortgage and savings experts have predicted that despite a rather poor outlook for house prices in 2024 a housing market crash is not on the horizon, with 8 out of 11 (73%) of the panel believing that the UK will avoid a crash.

The panel gathered by personal finance comparison website Finder, predicted that house prices will fall between 5-10 per cent in 2024, however, they felt these falls would be short-lived.

Luciano Rispoli, senior lecturer in economics at the University of Surrey commented: “Despite higher interest rates, housing demand is still strong and supply structurally low.”

Kate Steere, deputy editor at finder.com added that the UK housing market is “now in a period of adjustment, where prices have fallen and will continue to fall from their previous highs. But the fundamental concept of a shortage of supply and solid demand will stop house prices from spiralling downward.”

Ten of the 11 experts (91%) expected that the base rate will now remain at 5.25 per cent until the end of the year, with just one expert predicting it will fall to 5 per cent in December.

Paul Dales, chief UK economist at Capital Economics, felt the current interest rates could remain in place throughout 2024, saying: “The Bank (of England) seems intent on keeping rates high for long rather than taking them higher and cutting them again. Our forecast that core inflation and wage growth will fall only slowly suggests that the Bank will keep interest rates at their peak for a long time – perhaps until late in 2024.”

This sentiment reflects that of the Bank of England’s Monetary Policy Committee who despite data suggesting that inflation is set to fall quite dramatically in the next month, believe it will take more time to reach their 2 per cent target.

“We’ve held rates unchanged this month, but we’ll be watching closely to see if further rate increases are needed,” Bank of England Governor Andrew Bailey said. “But even if they are not, it is much too early to be thinking about rate cuts.”

According to the bank’s economic forecasts that were released along with this month’s interest rate decision, it is expected that inflation will drop below 5 per cent in October, primarily due to a reduction in domestic energy costs. Nevertheless, the bank warned that there is a potential for increases in oil and gas prices as a result of the ongoing conflict between Israel and Hamas, which could cause a setback in interest rate decline.

Despite the Bank of England’s cautions that interest rates may stay at these levels for the foreseeable future, mortgage lenders are demonstrating confidence that interest rates have topped out by lowering their rates, launching a number of sub-5 per cent deals, which could bolster the current, sluggish property market.

In other positive news, the UK’s economy has managed to steer clear of a recession this year. The latest figures from the Office for National Statistics (ONS) reveal that the Gross Domestic Product (GDP) – a marker of the total value of goods and services produced – saw a slight increase of 0.2 per cent in September. At the same time, the growth for August was slightly adjusted to 0.1 per cent. While these statistics suggest that there was no significant economic growth in the third quarter, they do confirm that the UK has successfully avoided a recession this year, which technically requires two consecutive quarters of negative GDP growth.

Meanwhile, the Chancellor of the Exchequer, Jeremy Hunt, said his Autumn Statement on 22 November will focus on kickstarting the economy. Property professionals will be hoping there will be some positive measures for the property sector in his statement.

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Alex Wright, Editor