a A recession in the UK looks almost inevitable – but some real estate agents are reporting a buying frenzy and a flood of property in the housing market, as people try to move into their homes before interest rates rise further to tame high inflation.
“Some buyers have made the decision to go in now before the next round of interest rate hikes, and this has added a degree of urgency to the market in recent months,” says Lucien Cook, head of residential research at real estate agent Savills.
Knight Frank and Hunters are among the real estate agents who have reported more properties coming to market. “The past two weeks have seen a huge uptick and last week was the best week on the Hunters roster of the year,” says Gareth Williams, managing director of Hunters.
“We are at a crossroads,” says Andrew Grooke, regional partner at Knight Frank. “Nothing has fallen yet. August has been our busiest month for our new announcements for 10 years in London, and our busiest month since September 2020.”
But economic conditions appear threatening. Even with the £2,500 cap price promised by Liz Truss this fall, energy bills will be double what they were last year, Inflation remains just under 10%.And the Real wages are declining Interest rates are expected to reach 3% by the end of the year. The Bank of England is expected to raise borrowing costs Again this week to combat inflation, despite the gloomy economic outlook, by at least 50 basis points from 1.75%. “For buyers, there is a feeling that I will do it now because I will get a better mortgage rate and maybe be able to borrow a little bit more than I will in three, four or five months,” Grocock says.
But experts say people will not pay a huge premium on real estate and will think twice before increasing their capacity, with a recession likely in the fourth quarter.
Despite the frenzy of buying in some areas of the housing market, there are ample signs that it is beginning to boil over. Show the official home price index Annual growth of 15.5% in July, the highest level in 19 years, but the comparison is artificially exaggerated. Sales were unusually low in July 2021, because the stamp duty holiday introduced to support the market during the pandemic ended on June 30.
According to Halifax, Britain’s largest mortgage lender, Annual house price growth slowed to 11.5% in August. Barratt, the nation’s largest homebuilder, provided further evidence of the slowdown in the housing market, saying that the number of homes booked each week through the end of August had fallen below the level of the previous year, and is now lower than it was before the pandemic, in part because “Increasing Uncertainty at the Macroeconomic Level”.
Shares in homebuilders have fallen over the past year, with prices for Persimmon, Bart and Taylor Wimpy dropping between 38% and 48% before the end of the Help-to-buy scheme ends next spring. However, many companies are optimistic, pointing to the chronic home shortage in the UK, and improved energy efficiency in new homes, which they say will support demand.
Consulting firm Capital Economics forecasts a 7 percent fall in home prices over the next two years, and says demand is already falling sharply. With the exception of March and April 2020, when the pandemic forced the housing market to shut down, the balance of new buyers’ inquiries in the survey by the Royal Institution of Chartered Surveyors fell to its lowest level since 2008 in August.
with Unemployment is lowest in nearly 50 yearsBy 3.6% and only Rising is expected to start in mid-2023 In the latest BoE forecast, most experts expect the housing market to slow rather than collapse. “I expect a slowdown,” says Jeremy Leaf, a property agent in north London. “There are fewer inquiries, and prices are already a bit lighter. It has become a more normal market, a return to what was pre-Covid.”
Savills is revising its forecast for a 1% drop in home prices next year, which could come down, Cook says — “Despite the current situation, it won’t be anything like the degree seen during downturns in the market. Housing in the early 1990s and 2008-2009″. Prices fell 19% over three and a half years in the early 1990s and by a similar amount in 18 months in the wake of the credit crunch, according to the National Building Society’s Home Price Index.
With three-quarters of borrowers working on fixed-rate mortgage deals, and increasing numbers fixed for five years (instead of two), they are in a better position to beat the higher cost of borrowing, says Cook. However, UK funding figures show that 1.8 million mortgage deals are set to expire next year and will need to be refinanced at a time when interest rates are rising.
Rent is also becoming more expensive. Many tenants have been forced to choose smaller properties – one- and two-bedroom apartments – property developer Zoopla reported last week, while new students in Manchester and other cities including Bristol, Glasgow and Edinburgh are forced to. Moving from neighboring cities due to the university housing crisis.
Rents rose to record levels during the summer. Zoopla has found that average rent across the country has grown by £115 a month over the past year, to £1,051. Rent now makes up more than a third of the typical income of a single householder. Hometrack, part of Zoopla, believes rental growth is nearing peak, operating at an annual rate of 12.3% for the country as a whole, and at an “unsustainable” rate of 17.8% in London, after double digits during the pandemic.
Yasir Khan, 40, lives in an 8-square-meter flat in Walthamstow, east London, with a shower, toilet and cook crammed into it. When he lost his job in 2018, he became homeless and lived in a shelter until Hackney Council found him the apartment. The rent of £811 comes from his all-inclusive credit. He suffers from severe depression and panic attacks, and is afraid to leave the house. At the same time, he feels “trapped” in the cramped space, which he says is “as big as a prison cell.”
“I struggle a lot, because I get subsidies and it is absolutely impossible for me to find something suitable for myself,” he says. He’s looking for a larger one-bedroom flat, but there aren’t many properties available in London that he can afford, at £1,100 a month. He moved to London to be near his nine-year-old daughter, who lives with his ex-wife.
“Four million people are renting in the private rental market. “For them next year will be a very worrying time,” says Henry Pryor, a purchasing agent. “The uncertainty is great right now, and people are worried about jobs. Mortgage lenders are more worried about self-employed people, and landlords want bigger deposits – and that’s what it looks like when the dawn breaks out of the housing market.”