Why you should still be optimistic about house prices

Rising interest rates, inflation, a cost-of-living crisis and a drastic cut in mortgage cuts are a perfect storm of factors which, during any other time, might have led to a house price crash. Yet, in reality, prices are actually holding firm. And in many parts of the UK, especially in the north and in regions of the Midlands, prices are still going up. The lack of supply in the market is driving this, so too is a crisis in the rental sector. Many people can’t afford to enter into rental contracts so they are saving up instead, and switching all their attention into trying to buy. This, in turn, puts sellers in a strong position; I estimate there will be rises of around 5% over the next six months. We also need to be clear that there are massive differences between now and the 1990s when prices crashed. Right now there is still money available to borrow, in 2008 there was not. Rates at 6% are more expensive, but still nowhere near previous highs of 10% and more in the 1990's crash. Also, commentators talking about slowdowns are not seeing the bigger picture. In the past few years, we’ve had double digit rises month after month in the housing market. This is not sustainable and has to end at some point. Smaller rises in property prices will boost the chances of those desperate to get on the housing ladder, especially if it’s matched by Government policy to support first time buyers. I’d urge ministers to look again at their Stamp Duty policy and think about targeting it towards the older property owners who might be tempted to sell up and downsize, thus creating additional supply in a crowded market. The big problem in the market right now is linked to borrowing Thanks to higher interest rates, we’ve lost over 1000 mortgage products in the last year and another 1000 since this debacle began. Some will of course return, but at rates that will seem shocking compared to previous offers. Some people will choose not to buy, others will cut their cloth and look to borrow less and keep the repayments the same as before. But for those with a variable rate or about to come off fixed deals, there are many sleepless nights ahead. Everywhere you look right now (and for some, it may be better to look away), there are sobering statistics which predict the property market is heading towards a cliff edge, which would mean widespread job losses across our sector as demand falls along with company profits. Has the bubble finally burst? I’ve been in similar places before, in 1991, 2000 and 2008, when a currency crisis, dotcom crash and credit crunch all obliterated the market for years. More recently, both Brexit and Covid-19 were billed as being the turning-points that would drive a dagger through the housing market. Yet not only did the market survive, it thrived, delivering successive quarters of house price rises very quickly after initial nervousness had settled down. But there is a big difference between then and now. Back then, the government and Bank of England saw the threat and responded with support and interest rate cuts. Now it is the Bank raising rates and the pound sliding due to government policy that seems to be the catalyst in this most recent shock. So just how bad are things likely to be? It is very early to say whether this is a blip or a trend. There has been some recovery in the pound and the immediate threat of emergency rate rises has receded. From my vantage point as the founder of House Buy Fast, a national property company, people are holding their nerve, for now at least. We have not seen a tsunami of fall-throughs that I remember so clearly from other market wobbles, thankfully. But remember it has, after all, only been a few days of relative chaos in the market. Make no mistake though, estate agents, buyers and sellers are watching events avidly and awaiting developments. Although it might be too early to have all the answers, it’s not too soon to be clear about what we need to see happen next. Whatever the politics though, one thing is essential – we absolutely must avert a house price crash. If interest rates do rise to the levels predicted, and that leads to a house price crash, it will actually become far more difficult for first-timers to buy. Higher rates mean it costs more to borrow than a year ago so even reduced-price mortgages will be more expensive each month. What’s more, affordability ratios would be tightened and the general economic shock in the whole economy, which would lead to bankruptcies and job losses, will mean banks are even fussier about who they would lend to. Many who would want a mortgage simply couldn’t get one, whatever the amount. Buyers would begin to hold back asking ‘why buy now when it could be cheaper next month?’ This would prompt a huge increase in demand for rental properties at a time many landlords will have sold up to reap the benefit of higher prices and better returns with money in the bank. That’s why the next steps the government takes in the days and weeks ahead are vital to the future of homeowners, buyers, all of us in the property sector and far beyond.

Why you should still be optimistic about house prices

Property expert and founder of House Buy Fast, Jonathan Rolande, argues why there are reasons to still be optimistic about house prices despite current economic turmoil

Read Next

What is causing European investors to lower their real estate allocations?

Unlocking the full potential of unused land in urban areas

Developers must unlock empty buildings for decarbonisation

The most lucrative up-and-coming locations to buy property

Commercial property and pandemic fallout – what should landlords know?

What is causing European investors to lower their real estate allocations?

Unlocking the full potential of unused land in urban areas

Developers must unlock empty buildings for decarbonisation

The most lucrative up-and-coming locations to buy property

Commercial property and pandemic fallout – what should landlords know?

Stage Fifty receives approval for Wycombe Film Studios

Nottingham BTR scheme brought to market for £23m

Catalyst and GLA exchange contracts over St Ann’s development

Savills advises on sale of 66 Derby homes to Hearthstone

Henry Boot sells 31-acre Coventry side to Countryside Partnerships

Read Next

What is causing European investors to lower their real estate allocations?

Unlocking the full potential of unused land in urban areas

Developers must unlock empty buildings for decarbonisation

The most lucrative up-and-coming locations to buy property

Commercial property and pandemic fallout – what should landlords know?

Related Articles

Stage Fifty receives approval for Wycombe Film Studios

Nottingham BTR scheme brought to market for £23m

Catalyst and GLA exchange contracts over St Ann’s development

Savills advises on sale of 66 Derby homes to Hearthstone

Henry Boot sells 31-acre Coventry side to Countryside Partnerships