While the temperatures are rising in the UK, and potentially reaching record heights, there are signs that the property market is cooling down, giving many buyers hope of a more balanced market.
According to new figures released by Halifax, the number of people moving house in the first half of 2022 has fallen by 35%, compared to the same time last year. While in the first six months of 2021 266,270 people moved house, in the same period this year only 172,510 did so, showing that the property market is cooling down.
While in 2021 56% of house purchases were made by home movers, people who sell their house to move to a new one, this year this figure has fallen by 9% to 47%. An indication that the property market is cooling down.
Cost-Of-Living Crisis Bites
It has been predicted for a while, but it seems that the cost-of-living crisis is finally impacting on the housing market. Prices soaring, increases in council tax and national insurance, energy and water bills rising and inflation still going up and rising mortgage rates are finally having an effect on the property market.
While last year, the stamp duty holiday has led to a 133% increase in home movers between 2020 and 2021, the cost-of-living crisis is now putting on the breaks. And while the number of home movers has declined drastically from last year, it’s still above pre-pandemic levels.
One reason people are still keen to move is the rising mortgage rates. With interest rates at 1.25% at the moment, but expected to rise further to combat rising inflation, many people want to move before they can’t afford a mortgage anymore.
The data from Halifax shows that people now need a 33% deposit to buy a new house, which means they need to contribute £134,108 towards their new home. Back in 2017, people only needed £98,219.
All this is likely to reduce demand over the coming months, returning the property market to a more balanced level.
Demand is likely to return to more normal levels in the second half of the year due to the rising cost of living and affordability concerns, however the prospect of further interest rate rises may drive some to act now to lock in a longer fixed-term mortgage rate.Tim Bannister, Director of Property Science at Rightmove
Prices Are Still Rising
This rush ensures that demand is staying high, even if it has declined since the heights in 2021. But it means prices are still rising, albeit at a slower rate than in previous months, showing that the property market is cooling down, although slowly.
In the last month average house prices have risen by 0.4% to a record high of £396,968. This has prompted Rightmove to revise their annual growth of house prices for this year from 5% to 7%.
The race to buy a house before mortgage rates make a mortgage unaffordable has kept demand 26% above pre-pandemic levels. However, demand is 7% lower than June 2021.
And at the same time, supply levels have started to rise, which is why the property market is cooling down. With 13% more sellers than last year, the stock levels are starting to improve. Even if stock levels are still 40% below what they were in 2019.
The increase in housing stock coming on the market will be a welcome sight for buyers, who had to contend with a sellers market for so long.
After such a crazy and fast market over the past two years, the signs are clear that the housing market is returning to more “normal” levels.
And while in June 60% of properties were SSTC within 30 days of coming on the market, summer is traditionally a slower period for the property market, with kids being off schools and holiday season approaching.
Summer Will Help Property Market Cool Down
This time is also normally the time when more houses become available to buy, which will help to re-balance the market, leading to a more manageable housing market for buyers.
Another sign that the property market is cooling down is the slight decline in sellers’ confidence. While in May 82% were confident they would complete a sale in three months, this number has fallen to 81%.
Only a slight decline, but it shows that the market is on the way to becoming more buyer-friendly again.
And while it will take a few months to show an effect, the cost-of-living crisis and the rising mortgage rates will all contribute to the property market cooling down.
The challenges presented by rising interest rates and the cost of living will no doubt have an effect throughout the second half of the year, as some people reconsider what they can afford.Tim Bannister, Director of Property Science at Rightmove