What Next for UK Property Prices?

With the most significant annual slump in property prices since 2011 now apparent, there is a growing anticipation of even steeper price reductions. As we enter a new era of rapidly escalating mortgage costs, I’d like to share my views on why I believe the UK property market could be heading for a steeper downward curve, albeit a slow starting one.

For years, the UK property market has been steeped in resilience, continuing to defy gravity in the face of economic headwinds. But as the famous saying goes, ‘what goes up, must come down.’ While the decline in property prices has begun, it’s my belief that we are just seeing the first tremors of what may be a much bigger shift in the market.

The dynamics that I think will drive this shift are driven by both economic and psychological factors. Here are my thoughts:

The Interest Rate Factor

The BOE, in a bid to rein in inflation, has hiked interest rates for the 13th consecutive time, taking the base rate to 5% with further increases in interest rates probable.

The Affordability Conundrum

With the relentless rise in borrowing costs, affordability is becoming an increasingly issue. The pain of the BOE’s squeeze has been deferred so far, primarily due to the large proportion of homeowners on fixed-rate mortgages. However, many of these borrowers will need to refinance in the coming 12 months and face significantly higher monthly repayments. The prospect of these rising costs could discourage new entrants and may force existing homeowners to sell, thereby increasing supply and lowering prices.

The Expectation of Lower Prices

Buyer sentiment plays a crucial role in price dynamics. The awareness of the and anticipation of further interest rate hikes are likely to hold back buyers, who will expect significant discounts. This ‘wait-and-see’ approach can slow market activity initially but, if a critical mass of buyers hold off, it can lead to a downward shift in prices.

The Momentum of Market Shifts

It’s important to remember that property market shifts often gain momentum over time. It’s akin to turning a large ship — the initial movement may be slow, but once it starts, the momentum can be hard to reverse. This is particularly true in a market like the UK where property transactions can take a long time to complete. So while we may not have seen a dramatic plunge in prices yet, once the downward trend takes hold, the pace of the decline could accelerate.

While the short-term outlook suggests a downward pressure on property prices, it’s crucial to remember that markets operate in cycles. While the present cycle seems to be ushering in a period of falling prices, this could open up opportunities for astute expatriates who can bear short-term volatility for long-term gains.

But lets be clear — prices are in for a fall!

#mortgage #interestrates #property #uk #expats

About Mike Coady

Mike Coady is an expat expert based in Dubai and is on hand to help with all of the above and more.

Mike is an award-winning money coach and industry leader in the financial sector.

Qualified to UK Financial Conduct Authority (FCA) standards, a member of the Chartered Insurance Institute, a Fellow of the Institute of Sales Management (FISM), a Fellow of the Association of Professional Sales (F.APS), a Fellow of the Institute of Directors (FIoD) and featured as a highly qualified Financial Adviser in Which Financial Adviser.

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Blog published by Mike Coady.