House prices saw the biggest monthly drop since October 2008, with rising borrowing and living costs forcing many to put their dreams of owning a home to a halt. The average UK property price fell by 2.3% in November, in its third consecutive month of decline, according to the latest report from Halifax. In the biggest housing market slump seen since the financial crisis, the average property now costs £285,579 – down from £292,406 in October – as economic uncertainty and a 11% inflation rate continues to erode household savings and budgets across the board. Nationwide has projected up to a 30% collapse in house prices whilst separate research from Rightmove found that buyer demand has already dropped 20% compared to last year.

As the housing market edges closer to a potential bust, property expert and CEO of iPlace Global, Simon Bath, explains that on one hand this could bring a renewed sense of optimism amongst prospective buyers. However, the current trajectory of mortgage rates alongside the turbulent nature of the economy could also take a toll on demand, with a new study from the Office for Budget Responsibility (OBR) projecting a 7.1% drop in real disposable income over the next two years.

Whilst the market slowdown appears to be unfolding at rates not seen since the the 2008 financial crisis, lending practices have significantly tightened since then. The fallout from September’s mini-Budget caused some of Britain’s biggest lenders including NatWest, Barclays, Halifax and Virgin Money, to pull deals and bring them back at higher prices. However, following the Autumn Statement, the average cost of fixed-rate mortgages has continued to edge down from its peak – with the average cost of a five-year fixed-rate deal dropping from 6.51% in October to 5.78%. Now, analysts are predicting that borrowers could continue to see falling mortgage prices in the next year.

Alongside this, there could also be a gradual tilt towards a buyers’ market in some regions of the UK, as stock levels continue to slowly recover – with recent reports revealing that the number of homes on the market is at the highest level since March 2021. However, Simon explains that the end of December and January will be a telling time for the housing sector in terms of demand. He notes that this is typically the time when there is a peak in interest from prospective buyers looking to upsize or downsize – which can potentially cause a big stimulus in the market. Without the bump in January, it could suggest that the fallout of recent events could linger further into 2023.

Simon Bath, CEO of iPlace Global, discusses the impacts falling house prices could have on first-time buyers and mortgage holders:

“At this point in time, the housing market is extremely sensitive. Homeowners and landlords have had to make big, reactive decisions within extremely short periods of time and now the future of the market hinges on consumer confidence, as well as the level of stock.

“Whilst this month’s house price fall will come as welcome news for prospective first-time buyers, there are still some potential hurdles that remain such as saving for a deposit amidst rising living costs, and interest rate increases pushing up mortgage repayments. Speaking very generally, my suggestion for all prospective buyers who are currently renting, is to wait until the new year. As we approach Christmas, we return to a quiet time in the market, as people spend more time with their friends and family. Transactions become less of a priority during the winter, and then ramp up again in spring.

“I think that the first half of next year could be quite tough for the housing market in general due to the sharp rise in mortgage repayments – families are definitely going to feel this the most. It’s important for the government to look at the state of the market and introduce new schemes to support both aspiring buyers and existing homeowners so that the dream of owning a home doesn’t become even more unattainable than it already is for many.”

David Hannah, Group Chairman at Cornerstone Tax, himself saying:

“We have faced a massive set of instabilities. We’ve had two years of the pandemic, necessary pandemic spending, we’ve had the war in Ukraine and that has increased inflation which has led to a massive increase in interest rates. Recent government policy in the UK has led to a devaluation in sterling and at least one if not two regime changes in the conservative party, and all of these factors have added to a sense of uncertainty of what’s going to happen in 2023.

“In early 2023 we will see slow demand. Only those people that are forced to sell will see a small fall in prices, however, over the whole of 2023, I expect to see low to mid to single-digit growth over the UK property market- between 5-8%. Despite the negative headlines we have been seeing, there is an underlying pressure on the market and that is leading to upward pressure on prices.

“We now have a growing number of people that want to move to the UK. The first is the overseas investor who regards UK property as a safe haven for their money because the country they principally live in is not economically or politically safe. The second are those who want to become second homeowners. The third and final group is those who want to leave their country of birth and are in need of a home. All of these factors over the course of the next 12 months, I believe, are what will support the UK market and leave it with a modest and steady rate of growth.

“There will be NO crash and NO 10-20% fall in property prices that we saw in the noughties. The UK property market has tended to be more stable than any other global market in property.”

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