Although today’s decision to hold interest rates at 5.25% had been widely predicted and was welcome good news for Britain’s homeowners it doesn’t reflect the full picture in terms of the housing market and the economy as a whole.
Whilst one report stated yesterday that there had been a slight rise in house prices in October the real picture is vastly different.
There is still a huge shortage of available properties and those that are available are getting hugely reduced levels of interest. At PLG we are frequently seeing the same properties reduced in price multiple times and it is easy to separate the “need to” from the “would like to” vendors.
This lack of stock has also coincided with a huge downturn in the numbers of buyers actively looking and it is clear that we are very much heading for a buyer’s market that could prevail for quite some time.
Indeed, we are agreeing deals that would have been impossible a few months ago and are hearing many other examples of a similar nature. One investor we know has agreed to purchase a new build at £400k that was being sold at just under £500k less than a year ago.
So where do things go from here?
As we have previously reported, whilst many are now being hit by the reality of much higher mortgage rates, there are still vast numbers of homeowners who have yet to feel the pain of rising costs.
It could be argued that when this does hit there will be an even more negative effect on property values. This coupled with what is now seen as a Europe wide housing slump could spell bad news for the housing market as a whole as there is already a huge shortage of stock and housebuilding is already at its second worst level since the financial crash of 2007. Indeed, the only time it was worse than now was in the early days of the pandemic which really tells its own story.
It is harder than ever to try and predict where things are going to go next year but this dark cloud does have a silver lining. A difficult housing market means that the welcome news for our clients is there are going to be deals to be done if the right property can be found.
As ever, time will tell…