Faint optimistic note drowned by chorus of concern for property

Sarah Coles, head of personal finance at Hargreaves Lansdown, comments on the publication of the ONS House Price Index and Land Registry house price data, showing the faint optimistic note is being drowned by a chorus of concern for property.

Key points from publication:
    • Average house prices were up 1.9% in the year to May – down from 3.2% a month earlier.
    • The average house price hit £286,000: £6,000 higher than a year earlier, but £7,000 below September’s peak.
    • House prices didn’t move between April and May – although they fell in 8 of 12 regions, and when seasonally adjusted, they were down 0.4%.
    • The North East had the lowest average house price, at £159,000, and London had the highest, at £526,000.
    • New-build property is up 18.3% in a year – down from 23.2% a month earlier.
Sarah Coles says:

“The faint note of optimism in annual price rises can’t drown out the chorus of concern for the property market this summer.

“There’s such a big lag in this set of figures that the mortgage misery we’re seeing now will only manifest itself in the data as we head into the autumn.

“The May figures reflect sales agreed as far back as February, when the prospects for the market looked rosier.

“House prices went sideways during the month, but mortgage rates were falling back and approvals were on the up.

“Optimism started to build that we could be heading for a soft landing.

“Since then, a dark cloud has settled over the mortgage market, with the average 2-year fix hitting 6.8%, and the average five-year rate at 6.33%, according to Moneyfacts.

“We’ve eclipsed the horrors of the aftermath of the mini budget.

“At these levels, it’s going to price an awful lot of buyers out of the market and force some remortgagers to sell up.

“Fortunately, there’s some hope on the horizon. The larger-than-expected fall in inflation, and the drop in core inflation announced today, may mean we don’t need quite as many rate rises as the market has been pricing in.

“Well before the Bank of England makes a decision about rates in August, the market will make its mind up.

“Lower rate expectations may well feed into fixed rate deals, and help them ease.

“We’re not going to see rates head down towards 2% any time soon, but we could see them move far enough to make a significant difference to buyers and remortgagers.

“Whether this can revive the property market remains to be seen.

“New-build prices will be one to watch too. This corner of the market has had a phenomenal run, but with the end of Help to Buy equity loans, it’s looking vulnerable.

“When the market turns, it’s often those parts of the market that have seen the biggest growth that tend to see the biggest falls.

“When it comes to new-builds, you’re already facing the loss of the ‘new-build’ premium when you sell up, so a weakening of prices among newer properties could prove a double-whammy.

“Given how popular these properties are with first-time buyers, who may not have a great deal of equity in their home, big price movements could leave them high and dry.”

 

Kindly shared by Hargreaves Lansdown

Main article photo courtesy of Pixabay