Whilst property prices have dropped for the fourth consecutive month, the average property is still worth £45,000 more than it was before the pandemic.
David Hannah, Chairman of Cornerstone Group International – the UK’s leading property tax experts – discusses why he believes Britain’s property market will avoid a crash
Recent findings from mortgage lender Halifax have revealed that house prices in July had fallen by 0.3%, consequently fuelling speculation that Britain’s housing market will crash in the second half of the year. Despite the doom and gloom from experts, the average property in the UK is still worth £45,000 more than it was before the pandemic. In light of this, Group Chairman of Cornerstone Tax International, David Hannah, discusses why he remains confident in Britain’s property market.
The cost of the average home is now 2.4% lower than it was a year ago in a period that has seen the Bank of England raise interest rates from 1.25% to 5.25%. Despite the difficult rise in the cost of living, Hannah points out that prices have changed little in nominal terms over the past six months and the market and buyers are responding to sharply higher borrowing costs in a predictablemanner. According to Halifax, buyers are opting for smaller properties that they can still afford, fuelling continued activity.
Hannah additionally highlights that factors beyond the scope of the property market are contributing to counteract the idea of a market crash. Notably, robust wage growth, which is maintaining a nearly 7% annual increase. Although the slight increase in unemployment might temper this progress to some extent, it appears unlikely to escalate to levels that could instigate a sudden decline in market conditions.
David Hannah, Chairman at Cornerstone Group International, discusses the effect of rising rates on the property market: “While there was a marginal decline of 0.3% in house prices for July, it does not mean the market is hurtling towards a dramatic crash. The average UK property continues to hold its ground, reflecting a substantial increase of £45,000 since the start of the pandemic in 2020.
“Amidst the backdrop of economic shifts and fluctuations in interest rates, it’s important to consider the broader context. A 2.4% decrease from the previous year may seem notable, but it’s worth recognising that the interest rates climbed from 1.25% to 5.25%.
“We are seeing continued market growth due to buyers sensibly adjusting their expectations on the size of properties that they can afford to purchase. Nevertheless, certain lenders are reducing mortgage expenses in response to the approaching peak of the bank rate. This suggests that although market sentiment may remain restrained, I hold the belief that the second half of this year will witness an improvement.”