Every economic indicator in the UK began to flash red, but the housing market continued relentlessly.
The National Construction Company will publish its latest housing price index for June this week, along with regional data for the second quarter, while the latest Bank of England mortgage data should also shed more light on the state of the property market in United Kingdom. Prices have risen 5% this year, although uncertainty about the economy more broadly means that Nationwide has not published an annual forecast of house prices.
Few would expect such lively conditions when real estate agents were shut down and builders knocked down tools at the start of the Covid pandemic.
However, demand remained strong due to the celebration of the coat of arms, introduced quickly by Rishi Sunak to support the market after its reopening, and the desire for more space and a greener environment as many office workers moved in from home. Even the end of the holiday for a stamp duty last summer and the rise of the highly contagious Omicron variant failed to stifle rising prices.
The fury of the housing market is partly caused by the lack of available property, which means that many new homes are looted within a week or two. Mortgage rates are low and the labor market is surprisingly strong: unemployment at 3.8% in April remained among the lowest levels since the 1970s.
Nationwide actually saw a slowdown in annual house price growth to 11.2% in May from 12.1% in April, but this was due to the effects of the base, and the monthly profit was strong at 0.9% – the 10th in a row monthly increase, said Nationwide chief economist Robert Gardner, noted.
The key question is how long the market can remain isolated from the cost of living crisis, with inflation in the UK rising to a new 40-year high of 9.1% in May and five recent interest rate hikes from the Bank of England. Gardner says there are only preliminary signs that the market is slowing, although, like other experts, he expects it to cool in the coming months amid the economic cold. Mortgage approvals in the UK fell to 66,000 in April from 69,500 in March, and net mortgage debt fell to £ 4.1 billion from £ 6.4 billion; both measures were slightly below the pre-pandemic averages.
But analysts point to a sustainable labor market, a continuing shortage of real estate and mortgage interest rates, which are still cheap by historical standards.
“I didn’t expect house prices to go up when the UK government closed the housing market: I thought house prices would be equal at best,” said Anthony Codling, an independent housing analyst and founder of the Twindig real estate website. . “Housing prices in the UK have reached new heights and many will hope that it is not about what is rising, it should fall.
The typical mortgage payment is 31% of the home payment. But a 10% deposit for a typical home for the first time equals 56% of the average annual income
Real estate firm Knight Frank is set: it has just raised its forecasts from a 5% rise in house prices this year to 8%, just under 10% up last year.
The impact of the increase in interest rates on existing mortgage holders is expected to be limited, as more than 80% of them are on fixed rate transactions. In 2007, at the beginning of the global financial crisis, about 45% of mortgage balances were with variable interest rates and this number increased to 65% in 2013. The typical mortgage payment amounts to 31% of the home payment, exactly above the long-term average of 29%, although still well below the 45% peaks reached just before the financial crisis.
But Gardner said a 10% deposit on a typical first-time home equals 56% of average annual income.
Meanwhile, life seems more difficult for tenants than for homeowners. The Center for Economic and Business Research says rents for new contracts rose 10.6 percent in the year to May, with those in London rising the fastest, at 15.7 percent.
The housing market seems immune to Covid shocks. This week should show whether the cost of living crisis can take it off course.
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