Insight From Our Chairman: The Condition of the UK Housing Market

It’s clear we’re facing a number of economic challenges in the UK at present. From the sixth consecutive interest rate rise having an effect on the likes of mortgage payments, through to rising fuel and food costs – with inflation standing at 9.9% in August – inevitably impacting households’ disposable income.

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However, amidst this prevalent uncertainty, it’s positive to see the housing market has remained remarkably buoyant. This is true even as activity begins to return to a more standard, expected pace after an exceptionally busy several years as a result of the Coronavirus-induced housing boom. 

For the first time in 2022, house prices have fallen slightly in August, down 1.3% to an annual average of just below 11%. But this dip is consistent with seasonal price trends witnessed over the last decade, and house price growth still remains strong. 

The summer puts many prospective home buyers’ plans on hold as they enjoy their holiday breaks, but as we head into autumn, activity typically picks back up, with the autumn months traditionally a busy period as buyers and sellers look to move before the new year.  

And though we certainly can’t escape the impacts of the aforementioned rising interest rates and household costs on buyer affordability, the current – and longstanding – mismatch between the ongoing high levels of buyer demand and the number of homes for sale will remain a significant factor influencing a robust housing market in the UK. 

When compared to 2019, the level of available housing stock is down 39%. Meanwhile, whilst buyer enquiries to estate agents have fallen 4% on 2021, they still remain 20% higher than pre-pandemic levels. 

Clearly the gap between supply and demand remains prevalent, resulting in steady house price growth and an excellent opportunity for investors to play a role in closing the gap whilst gaining exposure to the popular and traditionally resilient asset of residential property. 

It’s widely acknowledged that much of the increased demand among home buyers has stemmed from changes in the way in which many of us now work. With more and more people working from home, larger homes remain in particularly high demand due to a need for more space. 

And what’s more, gardens are proving to be a non-negotiable feature for many house hunters who are now more receptive to their benefits after spending a prolonged period of time sequestered to their homes.

Housebuilders have been responsive to these changes, and are now more than ever chasing key locations such as semi-rural spots with access to high quality road and rail infrastructure and in close proximity to schools and local amenities – helping buyers maintain the balance they now increasingly look to be searching for. 

It’s also important to note that, as there always has been, there will continue to be property hotspots where we all live. These are areas that are continuously in high demand with buyers and where house prices subsequently remain strong. Location will continue to be key.


What to expect from the housing market going forward

Buyer demand is easing when compared to the busy market of 2021, but this was always anticipated, and does not signal bad news for the market or, importantly, property investors. 

The data suggests there continues to be a sufficient imbalance between supply and demand to prevent any major, out of the ordinary house price falls in 2022. House price changes for the rest of the year are expected to follow the usual seasonal patterns, resulting in an annual growth of circa 7%, even accounting for the wider economic uncertainty.

And finally, though interest rate rises will gradually filter through over the remainder of the year, they currently are not having a significant impact on the number of people wanting and looking to move house – which once more shows the resilience of the market and the continued demand from homebuyers