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The UK Housing Market

UK Property Market Update

Rightmove property prices: Rightmove has just reported property prices for the UK during June. Prices reached their sixth consecutive record of £369,968, up 0.4% in the month (+£1,354).

Price and sales reports are a little skimpy at this point, due to the pandemic shutdowns, but let’s take a look at what’s been reported for 2022, and recent months, and the UK property forecast for 2023 and the next 5 years.

Not Surprisingly, Property Demand is Down

Royal Institution of Chartered Surveyors (RICS) stated that 27% of professionals surveyed saw reduced interest from potential house buyers back in May. The new rate is down from the 9.7% year over year rise during May.  Of course available stock for sale has sunk 40% too and thus creating competition for those on the market.

Rightmove stated that a continued desire to move and low inventory of homes for sale are driving further price growth. Home buyer demand continues to exceed historically normal levels and is now 26% higher than at the same time in 2019, although down 7% from one year ago.

Record property prices combined with rising interest rates, means first-time buyer’s monthly mortgage payments for a two-year fixed rate loan is now 20%, or £163, higher than at the start of 2022, now standing at an average £976 per month

Savills says rent prices in the UK have risen 11.8% higher than 12 months ago. Rent growth slowed to 2.2% in May, down from 3.8% last November.

UK property price index up to June 2022

UK property price index up to June 2022. Screenshot courtesy of TradingEconomics.

 

Average UK home prices.

Average UK home prices. Screenshot courtesy of Trading Economics.

Home prices in all regions have risen 8% to 12%.

 

6 Factors Causing Price Rises This Year

  1. rising mortgage rates and buyers impulsive (FOMO)
  2. subdued home supply
  3. rising inflation could persistent raising new home prices
  4. home prices on an upward trend for two years due to demand despite all the issues
  5. construction output down sharply from last year
  6. housing starts only up slightly from last year

In a Mortgage Solution’s recent report, Mark Harris, chief executive of SPF Private Clients, said: “Demand for mortgages is strong as rates remain competitive, even as swap rates continue to rise. Some heat has come out of the purchase market compared with this time last year which is welcome as that frenetic pace could not continue. Remortgaging activity is strong as borrowers attempt to lock into low mortgage rates before they disappear.

Mortgage rates are climbing fast, nearing 4% in the UK. Mortgage approvals have fallen strongly in the past 9 months and are down 12% from last March of 2021.

Harris further suggested that a revamp of stamp duty is needed to stimulate activity in the UK housing market.
And in the same Mortgage Solutions report, Jeremy Leaf, north London estate agent and former RICS residential chairman said “Demand still comfortably exceeds supply and correctly-priced houses continue to attract considerable interest while mortgage repayments remain relatively affordable.

The question then is how long demand will persist? And with such high demand, can home prices and rent prices decline appreciably?

UK Regional Property Market Report

Rightmove reports that asking prices are on the rise, up 1.7% since last month. Wealthier buyers are willing to pay more to acquire their next home.

Past Rightmove and Homelet Reports on 2021

Rightmove revised its house price growth forecast for the full year of 2022, from 5%7% despite a cooling market.

“The challenges presented by rising interest rates and the cost of living will no doubt have an effect throughout the second half of the year, as some people reconsider what they can afford. However, there is also anticipation among would-be home-movers that personal finances may become even more stretched in the coming months, with further interest rate rises expected and the energy price cap jumping again in October.” — RightMove’s Tim Bannister

 

What’s Causing UK Home Price Rises?

The cause of the price increases?  Let’s list them all:

  1. strong buyer demand from immigration, equity-rich buyers
  2. inflation, new construction costs rising
  3. inventory growing slightly
  4. migration out of London to larger homes in suburbs and northern England and Scotland
  5. low mortgage rates
  6. pent up demand from the pandemic shutdown
  7. speculation as economy improves and foreign buyers return

In our previous update on the UK real market forecast, we predicted house prices would rise and demand for homes would pick up. It’s actually done much better. And UK rent prices are on the rise too.

Savill’s 5 Year Home Price Forecast – 2022 to 2026

As you can see in this 5-year forecast chart of the 2022 to 2026 period,  Savills UK predicts moderating in property prices.

UK property price 5 year forecast. Screenshot courtesy of Savills.

 

Economic factors for UK housing markets. Screenshot courtesy of Savills.co.uk.

 

UK property price 5 year forecast. Screenshot courtesy of Savills.

However, Savill’s notes that UK average incomes will not keep pace with home price rises.

Trading Economics suggests the property market will increasingly heat up as 2023 progresses.

Trading Economics UK Nationwide property price forecast for 2023. Screenshot courtesy of tradingeconomics.com

Hometrack and Zoopla data shows buyer demand remains strong.

UK Home Buyer demand.

Screenshot courtesy of Hometrack.co.uk. UK Home Buyer demand.

City by City, UK Property Price Chart

City by City, UK Property Prices.

City by City, UK Property Price Chart. Screenshot courtesy of Homelet UK.

UK Rent Prices

Rent prices have been sliding for many years, keeping UK renters happy

UK house rental prices. Screenshot courtesy of ons.gov.uk.

UK Rent Prices (up to date from homelet.co.uk)

Homelet’s April 2021 the rent report shows that the average rental price for a new tenancy in the UK was £996 per month, a rise of 2.9% from last year. Their rent report further shows:

  • average UK rent grew .4% to reach £996 per month
  • ex-London, the average rent in the UK is now £853, a rise of 0.7% on last month and 6.2% on last year.
  • 11 of the 12 regions showed an increase in annual variance, with the largest being the South West at 8.6%.
  • The South West had the biggest increase of 8.6% between April 2021 and April 2021.
  • Average rents in London are down YOY, showing a 5.3% fall between April 2020 and April 2021
  • average rental value in London (£1,580) is still 85.2% higher than the rest of the UK

UK Renter Statistics

The English Housing Survey, published by the Ministry of Housing, Communities and Local Government (MHCLG) revealed 4.5 million households live in the private rented sector in England and another (4.0 million) live in the social rented sector. They comprise more than 1/3rd of the UK population. 84% state they are satisfied with their current accommodation. They believe tenants move because they must move.

According to the English Housing Survey, private renters spent a third (33%) of their household income on their rent. That compares 28% for social renters, and 17% for mortgagors. Rents percentage of household income was 6% higher for private renters in London (42%) than for the rest of England (30%).

Most private renters (71%) said they found it easy or very easy to pay their rent. They are paying about a third of their income on rent (according to the report).

Tenants Aren’t on the Move

The report indicated that the main reasons for moving in the last 3 years were job-related (18%)and moving to a better neighborhood (16%) and moving for a larger residence (13%). 12% moved due to the landlord’s request.

63% of private renting tenants have no savings, and a third report having a small amount of savings. Given housing prices, it is a reach to say British renters are ready to buy a home. Although 58% says they would like to buy. 77% of younger Brits believe they will buy at some point.

 

See also: Best Property Management Software | Property Market UK | German Rental Housing Market | Berlin Property Market | Buy Property in BerlinAustralia Housing Market | Sydney Australia Property Market  Housing Market and Property Management | Property Management Accounting | Property Management Trends  | Property Management Metrics | California Housing Market | Texas Housing MarketBest Cities for Rental Property | Cloud-Based Property Software | Property Software ReviewsUS Housing Market |

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