Last thing many expected at the back end of 2022 was a positive start to the new year
The January rebound in asking prices for homes came as a surprise to many.
So why were asking prices up, in a difficult housing market?
One market insider has two reasons: optimism on future Bank of England rate hikes and what he calls “the Christmas effect”
Bank of England rates: reasons for optimism
A January rebound in asking prices, tracked by the Rightmove house price index, came as a surprise to many.
“With the backdrop of increasing interest rates last year and the cost-of-living crisis taking hold, one of the last things I thought we would see coming into January 2023 was the rebound of property prices,” said Mike Brown (pictured), managing director of Crystal Clear Financial Services.
But Brown said two key reasons for the rise in asking prices have, in isolation, built momentum in the property market.
“When rates increased through the Bank of England, and with the frequency of those increases, people put the brakes on moving, on buying, on doing anything. And so the market came to all but a slow crawl, edging towards the end of the year,” Brown said.
Then came the news that the degree of increases to the base rate may not go as high as expected – so in essence, some good news.
Brown said this was especially beneficial for first-time and next-time buyers who had adopted a ‘wait and see’ strategy to see what the highest interest rates were likely to be.
Brown said the markets are now settling. Rates are beginning to stabilize, and in some cases come down, which again injects a feelgood factor.
House price demand: The Christmas Effect
“You then have what I call the Christmas effect; everyone sat round the table on Christmas Day, not enough room and being the catalyst to commit to moving in the new year, then fuelled by the New Year’s Resolution of ‘this being the year to move’,” he said.
Brown conceded that this is just an opinion based on emotional elements, but believes it does have a bearing.
He believes that when you apply this to the backdrop of rates coming down, better news in terms of the potential spike of rates and the Christmas and New Year effect, it is not overly surprising to see market activity now picking up.
Albeit slower than last year, Brown added that the fallout from these effects has led to purchase activity and asking prices beginning to reflect the sentiment of what has been happening in the market at the moment.
“I think this year will be more up and down in terms of trending on property prices, and there will have to be some market adjustments to prices, but it is never a bad way to start the year with some positive news, rather than the market crash that was suggested in the latter stages of last year,” he concluded.
Do you believe the market is now showing signs of stablising? Let us know in the comment section below.
