Petrol Down, Rents Up, House Prices Down…

• Petrol Down.
• Diesel Down.
• Wholesale gas prices down.
• Rents up.
• House prices down?

Many commentators are saying the outlook for the housing market is bleak; after several years of growth, the market is slowing for several reasons, predominantly rising borrowing costs.
Some think the pressure on prices is likely to continue throughout 2023. While this is not great news for buyers who bought in the last few years, it could be better news for people looking to buy in the next twelve months.

While some analysts predict prices could fall by as much as 30%, any forecasts should be taken with caution, a pinch of salt even.   The Office for National Statistics states that prices have risen 28% since April 2020. Therefore, if prices fall by 30%, the average house price will be at a level last seen in 2016. On the other hand, if they drop 20%, they will be about the same as they were just before the pandemic.  It is worth remembering that these stats are national.  Prices in SE London did not rise by 28 or 30%, so they are not likely to fall as much.  What we are seeing is a correction, not a crash.  I am hopeful, confident even, that the correction in SE London is and will be slight. I would not be so confident outside London, is looking more inline with the national statistics.

While supply and demand are significant factors, interest rates are important. The base rate of the BoE has jumped from 0.1% to 3.5%, which will impact house prices as some buyers will have to re-examine what they can afford. The time of cheap money is well and truly over.

A big issue, nevertheless, will be existing homebuyers coming off their fixed rates mortgages and seeing higher monthly repayments. While some borrowers will be able to afford these increases, some won’t. Easy and cheap money, which many thought would be endlessly available, has led to some people making unwise and poor investments. It is inevitable that when interest rates rise to combat inflation, this will affect what people can afford to borrow, impacting where prices are heading. However, while the better quality property may be less affected than some, everyone will feel a chill.

Estate Agents must stop talking the market up if they want to be taken seriously. Instead, sellors should be given honest advice about the market and what their homes are worth, and there should be no place for agents who overvalue to obtain instructions. I find it alarming to see the number of properties which have been on the market for over twelve months. The last real crash in the property market was in 2008, some fifteen years ago. Most estate agency staff and many branch managers under the age of thirty-five have never seen a tough market. Some estate agents have closed branches.  Yet the level of available overpriced stock keeps rising.

With the increase in rents, potential yields increase. The asking prices of small flats are presently low, whilst the rents are high. If you can buy and finance in a Company name, then buy-to-let, has started to make financial sense again. Feel free to ask for any advice.

As always, advice and smiles are free.

#AskBeaumont