While living costs soar and the Bank of England warns of an end-of-year recession, the housing market seems to have remained fairly resilient throughout. In fact, property website Zoopla predicts higher growth and more sales than what was initially expected at the start of the year.
Despite the cost of living crisis, demand for properties remains high in the UK – much higher than the supply available.
Although demand figures have slowed in recent months, Zoopla’s research suggests it’s still 25 percent over the five-year average and “on par” with this time last year.
Zoopla’s Ellie Isaac said: “The UK is on track for 1.3 million sales in 2022 with a house price growth of five percent, highlighting the continued interest in buying property.
“Our data shows there are enough people who want to keep moving to support normal levels of activity in the market.”
House price growth, however, is proving to not be immune from the cost of living crisis as trends show signs of these slowing off the high base at the start of the year.
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Ms Isaac said: “We expect the rate of growth to slow further over the second half of the year, but not as fast as some may expect.
“While demand continues to outpace supply, the number of homes for sale is now recovering after a red-hot two years.”
Regionally, Zoopla’s Index found the more affordable markets are the ones making the most gains.
Average home values are rising by 11 percent in Wales, and areas in the South West and East Midlands remain in the double digits, too.
Whereas the less affordable markets, such as London, are seeing the least gains in house price growth.
Ms Isaac said: “London is the UK’s most unaffordable housing market. This is limiting further price gains at the moment, and prices have risen just four percent year on year.
“Meanwhile in Scotland, Aberdeen remains the only city that has experienced negative house price growth over the last 12 months, with house prices down -1.6 percent.
What should you expect over the next six months?
House prices saw a 3.6 percent increase during the first six months of 2022 and while growth still remains on the incline, albeit modestly, this figure is predicted to rise “to five percent by the end of the year”, according to Zoopla.
This increase has been attributed to the continued demand outweighing supply, however, Zoopla experts expect the cost of living pressures to hit the market at some point.
Ms Isaac said: “Homeowners are not immune to the pending economic headwinds. There are signs that the recent strength of the market will weaken in the next few months.
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“We’re all feeling the cost of living pressures, rising mortgage rates and a squeeze on disposable income. And these factors will all impact homeowners’ desire to move, which will become apparent later in 2022 and into the first half of 2023.”
A decrease in demand for homes in the more “aspirational rural or coastal areas” is expected in the next few months, while house price growth has already lost momentum in the western regions.
Ms Isaac said: “House price growth has already started to slow at the Welsh/English border and Powys region (Llandrindod Wells, Shrewsbury and Chester), compared to June 2021, and coastal areas like Truro in Cornwall, Torquay in Devon and Canterbury in Kent are also slowing down.”
The Index data shows buyer demand in these areas now rests at -16 percent below the five-year average and -22 percent or more below the July 2022 levels.
Will there be a house price crash?
Although it’s hard to say, Zoopla experts think a house price crash is unlikely.
Richard Donnell, director of research and insight at Zoopla said: “Double-digit falls in average prices are highly unlikely, even as we face higher mortgage rates and increases in the cost of living.
“House prices only tend to fall when there are forced sellers. That’s people who can’t afford their mortgage and have no option but to sell.
“But in the UK, less than half of homeowners have mortgages. 85% of those who do have mortgages are on fixed rates for 3 to 5 years. This insulates the market from short-term changes in mortgage rates.”
“It would take interest rates rising much higher or for the strong labour market to turn on its head before we saw a housing crash.”