Warning: UK Property Market Is Slowing Down

House building giants such as Barratt Developments have warned that the UK housing market is slowing down.

One of the many reasons cited was that “homebuyer confidence and the availability and competitive pricing of mortgages critical to the health of the UK housing market in the coming months”.

The firm has put a hiring freeze in place and has scrapped plans for up to 3,293 new homes, as well as freezing purchasing land.?

Barratt saw the number of weekly house-reservations fall by just over a whopping 40% from 259 per week in the second half of 2021 to 155 in the last six months of 2022.

Buyers are being cautious, which is predicted to be the behaviour for the coming year.

So, why are we seeing this behaviour?

Interest Rates

Mortgage rates surged after the government's mini-budget in September, peaking at 6.65% for a two-year fixed term contract.

Now, it’s reported that over 800,000 UK households are to see their mortgage rates double in 2023.

This is adding to the pressure of the already difficult living standards in the UK.

More than 1.4 million fixed-rate borrowers will have to renew their mortgage in 2023 meaning there is a HUGE risk that repossessions will boom.

As people’s mortgage rates increase, they are not going to be able to afford the monthly repayments, meaning their property gets repossessed and that in turn will push prices further down, triggering an even bigger crash.

Or, the same people are going to sell and they have to sell quickly, which means they have to sell cheaply, setting a new price point for the market, bringing prices down which will also trigger a crash.

These factors and forces are going to push the property market’s prices further and further down.

Cost of Living Crisis

It’s simple, a lot of people simply can’t afford to be buying new properties.

All of these things are happening right now and it’s real:

• Your spending power is as low as it’s been since WWII.?
• Your wages aren’t increasing
• Companies are putting in hiring freezes and not paying bonuses
• There are strikes going on up and down the country, every other day because of the need for wage increases
• There is a HUGE fuel crisis where people are having to choose between heating and eating
• We’re having double digit inflation. Massive quantitative easing, HUGE printing of money, the debasement of YOUR currency
• The cost of food, energy and raw materials are going up and up and up
• Taxes and National Insurance are up and going up further
• The ability to trade and the supply chain has been restricted because of Brexit
• The mismanagement of our country and economy by a government who seem to have one rule for them and one rule for us
• Markets and asset prices are dropping, we’re currently in a recession or EVEN a depression
• There’s a war going on in Ukraine which is inadvertently affecting our fuel and food prices

Yes, it’s been going on for a while but now it’s accelerated and gained velocity.

All of this contributes to the UK property market slowing down.

Political & Economic Uncertainty

There’s a lot of uncertainty in the UK’s housing market with a new Prime Minister, the Queen’s death and an economy that’s in recession.

Many people are biding their time and waiting to see what happens before committing to HUGE purchases such as a new property.?

Because the housing market sector is notoriously sensitive to uncertainty, it’s expected to drop even more so in 2023.

The UK property market may be verging on a major downturn, with some experts warning of a collapse in prices of up to 30% as data points to the biggest slump in demand since the Global Financial Crisis.

New homebuyer enquiries plunged in October to their lowest level since the 2008 financial crash, the latest RICS housing surveyors report showed in November 2022.

The market slowdown is a postponement from a two-year, pandemic-induced home buying frenzy, with property transactions in September down 32% annually from a 2021 peak.

Nationwide, one of the UK’s largest mortgage providers, said in November that house prices could collapse by up to 30% in its worst-case scenario. Meanwhile, the gloomiest of 2023 estimates from banks Lloyds and Barclays point to drop-offs of almost 18% to over 22%, respectively.

Prices are already falling in some places, according to property search site Rightmove.

The Pandemic

When the pandemic hit and lockdowns were announced around the world there were many doom and gloom predictions about how it would affect the property market, which luckily didn’t come to fruition.

The pandemic changed buyers’ priorities, with many looking to buy in rural areas, rather than the previously dominant cities.

Covid-19 caused lasting changes in the property world with these impacts still being felt in the market today.

Following the announcement of the first national lockdown in March 2020 the property market froze, with the property website Zoopla predicting demand would drop as much as 70%.

This freeze was partially caused by the UK Government urging people to not move house as part of the guidance to stop the spread of Coronavirus.

Experts predicted that this halt in the market would remain the case for at least three months and advised people to not move home unless they “absolutely had to”.

The Mortgage Market also became more difficult during the first lockdown, with banks rapidly reducing the range of products available, making it hard to find any mortgage deal with a minimum deposit smaller than 40%.

One of the ways the government tried to stop the UK from going into a recession when the pandemic hit, was to introduce the Stamp Duty Holiday in July 2020.

This meant that the UK housing market improved with house prices skyrocketing by an average of 10.2% between March 2020 and March 2021.

Since the Stamp Duty Holiday ended, combined with increasing inflation, the cost of living crisis, the UK going into a recession and increasing mortgage rates the housing market has fallen in line with what was once predicted in 2020.

How does all of this affect you?

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