The Housing Slowdown is Finally In Sight

Latest data shows that UK housing market is slowing down

New data shows that the UK housing market has started to slow down after prices hit a record for six months in a row.

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According to the latest Property Transaction data released by HMRC:

  • Residential transactions in the UK were 96,290 in June
  • This is down 55.1% compared to last year and 3.1% lower than May
  • Non-residential transactions totalled 8,850 last month
  • This is 9.5% lower than May and about 24.3% lower than last year

Both year-on-year drops are to be expected, given the sharp rise in transactions that was triggered by the stamp duty holiday during the pandemic.

Experts have said that the slowdown in transactions is unsurprising due to steep rises in interest rates and inflation, as well as the spiralling cost-of-living. These factors are making potential buyers more risk averse, triggering a rebalance of buyer and seller demand and causing the housing market to slow down.

Jason Tebb, CEO of OnTheMarket, told Property Industry Eye:

Transaction levels were slightly lower in June compared with May, however while the frenetic pace of the housing market may have slowed, the market continues to show remarkable resilience. As evidence emerges of more stock becoming available, we’re seeing the beginning of an inevitable rebalancing of supply and demand, yet this will take time.

A mortgage spokesperson for Quilter, Charlotte Nixon, agreed, saying that the cost-of-living crisis is ‘now weighing heavily on people’s finances’, so we may be about to see the ‘start of the long-awaited slowdown’. She added:

UK monthly property transactions have slowed dramatically in comparison to the rapid pace witnessed in June last year when the first stage of the stamp duty holiday was withdrawn, and they now sit even lower than pre-pandemic levels.

North London estate agent Jeremy Leaf added that the latest figures are ‘always a better indicator of housing market strength than more volatile house prices’:

The latest numbers are no exception and show how the cost-of-living crisis and rising interest rates in particular have contributed to an increase in the length and reduction in the number of transactions. Nevertheless, at the sharp end we continue to see a steely determination to move, particularly from those keen to take advantage of attractive mortgage offers which are imminently expiring.

Is now the time to buy?

In an attempt to make it easier for home buyers to take out a mortgage, from August lenders can drop one affordability rule when assessing people’s finances.

This means several things for those looking to invest in property:

  • Borrowers may be able to secure larger loans compared to what they were previously 

eligible for

However, it’s a case of buyer beware. Martin Lewis states that being tempted into a larger mortgage than you can only just afford now could be catastrophic if you cannot afford repayments later as rising interest rates and the cost-of-living continue to take a hold. 

Lewis warns that: 

Of course, interest rates are up and they’re likely to go up more. The cheapest fixes back in October were just below 1%, now they’re just below 3%, adding £200 a month to a £200,000 mortgage. Now, many are, of course, protected because they’re still on fixed rates, not variable rates. But millions of those are due to end this year, and many more next year. 

Lewis’s concern is that people will fail the affordability tests, which will mean they might have to move to a much more expensive standard variable rate: ‘Ironic, isn’t it? They can’t afford a cheap rate. So how can they afford to pay much more?’

Is now a good time to invest in property?

Mashroom recently reported that as rents continue to rise tenants are struggling or becoming unable to pay due to cost-of-living squeezes.

But the demand for rental property is still there, with 60% (that’s a 21% increase!) of landlords in England and Wales reporting a rise in demand for rentals. 

So whether or not it’s a good time to invest really comes down to your personal circumstances. 

Yes, the cost of buying a house looks likely to fall, but probably not enough to bag yourself a bargain. And even if you do, the cost of borrowing doesn’t appear to be coming down any time soon.

So before you invest – do your homework! Get the advice you need before you dive in.

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