Average house prices in May rose by 1.9% on an annual basis, according to the Office for National Statistics
The average house price across the UK in May rose by 1.9% year-on-year, according to the Office for National Statistics (ONS). However, this rise is lower than the 3.2% annual house price growth of the previous month.
So where does the market really stand? Mortgage Introducer sought to gain insight from brokers on the latest house price data.
House price correction
Stephen Perkins (pictured), managing director at Yellow Brick Mortgages, said the UK residential property market will likely see a much-needed price correction during the second half of the year.
“This ONS 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 buyer’s market,” he said.
Perkins added that with plenty of properties to choose from, 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,” Perkins said.
As more and more borrowers come off their low fixed deals into the new rate reality, he said there will be many keen to sell and downsize to help reduce their outgoings and stay afloat.
Uncertainty and volatility
Ross McMillan, owner at Blue Fish Mortgage Solutions, said typical seasonality, alongside current uncertainty and rate volatility, means the volume of property transactions will almost certainly be down for the remainder of 2023.
However, McMillan added that 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, he said, 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 between 5% and 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,” McMillan said.
In Scotland, he added that 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.
Russell Maggs, mortgage adviser at 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 the recent positive inflation data, we could still see the Bank of England increase rates again, which will further impact sentiment,” he said.
Maggs believes buyers need time to get used to the higher interest rates we now have; however, he said the imbalance between supply and demand should ensure property values do not 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, while prioritising keeping a roof over their heads,” Maggs said.
What is your view on the housing market following the latest house price data? Let us know in the comment section below.
