UK house price slump fears probed as interest rates rise ‘Demand still outstrips supply’ | United Kingdom | New
The housing market is becoming less affordable, with prices rising 9.8% in the year to March, according to the land registry’s most recent figures. However, experts believe that demand remains high, so prices will not fall to balance rising interest rates.
Buying agent Henry Pryor predicts that demand for UK property will continue to significantly outstrip supply, meaning UK property prices are extremely unlikely to fall.
Mr Pryor told BuyAssociation.co.uk: “It will dampen enthusiasm but it will not drive prices down. House price inflation by this time next year will be 2% instead of 5%.
He added: “Demand always exceeds supply, even when property prices fall historically.
“The average real estate agent’s office today has about 20 homes for sale but nearly 400 buyers on their books.”
Fears of a housing market crash are growing due to the cost of living crisis and the impending recession caused by the war in Ukraine and the COVID-19 pandemic.
But a crash similar to the one the country experienced in the 1990s is “extremely unlikely”, a Bank of England executive has said.
Sir Jon Cunliffe, Deputy Governor for Financial Stability at the Bank of England, told ITV News: “I am certainly not predicting a collapse in house prices.
“I think when the rate of increase decreases, that’s a correction, and then there’s a question of whether house prices are rising faster than other prices.”
He added that the impact of interest rate hikes will take some time to show in the housing market.
Sir Jon said: “I think a lot of [the rise in house prices] is related to how the pandemic affected people and affected their preferences of where they wanted to live.
“The other factor [is] many people accumulated savings simply because they could not spend, so there is probably £200bn of additional savings in the economy of this period.
“I think it has also helped people get into the housing market to buy a home.
“A very important fact – even though house prices have risen and continue to rise rapidly – household debt, the amount of mortgage people are borrowing relative to their income, hasn’t really changed. “
Have your say: Should Rishi stop raising the retirement age to 70?
Bank pundits pegged the rate at 1.25%, up from 1% previously, and the fifth straight increase as it tries to rein in runaway inflation.
He also warned that prices for households across the country could rise even more than previously thought.
Three of the nine members of the Monetary Policy Committee (MPC) voted for an even bigger hike, arguing that rates should rise to as much as 1.5%.
In an opinion, the committee said: “Given continuing signs of strong cost and price pressures, including the current tightness of the labor market, and the risk that these pressures will become more persistent, the committee has voted to increase the discount rate by 0.25% points.”