Halifax house price jibber jabber

House prices are still going to be higher by the end of the year, as the data we see now is based on what value house sales were agreed five months ago and that will take time to feed through. Demand is still very much there and the drastic shortage of property stock just keeps driving prices up. We still have a shortfall on UK housing stock of about 4 million properties so until that changes, which seems incredibly unlikely given the track record of successive governments, the inflationary pressure on house prices will not subside.

I'll be surprised if house prices aren't falling by the end of the year at the very latest. We're noticing more people holding off buying now, spooked by the economic outlook, higher mortgage rates, and the expectation that property prices will soon fall. We're also likely to see more distressed sellers, unable to afford the mortgage alongside other debts and all the other cost of living increases. A long, deep recession could turn a trickle of forced sellers into an avalanche.

Having posted double-digit growth during a global pandemic, it's a brave person who bets against the UK property market. There's every chance house prices will shrug off war in Europe and the cost of living crisis, albeit with more modest growth, especially as property has always been a good 'inflation hedge'.

Lenders are tightening up on affordability checks, the cost of living has increased sharply and the jobs market is flatlining, which should be a recipe for house prices to tumble. However, this isn't the case, for now at least. What matters is whether inflation is at the peak or still getting warmed up. The average price of a new home in Coulsdon, Croydon (Zone 6 of London) is now an eye watering £540k with detached properties selling for an average of £770k. With a 10% deposit plus stamp duty, first-time buyers will need a deposit of £54k and stamp duty of £17k. That is £71k in cash required to buy an average house in Croydon for a first-time buyer. It's insane. Mortgage affordability is becoming increasingly difficult to achieve for young, first-time buyers due to the dramatic rise in the cost of living. An average salary in the London Borough of Croydon is £35k. In the first-time buyer bracket, this drops to £30k. Without Help to Buy or any other financial assistance, the average first-time buyer can afford to borrow between £120k and £150k, which would mean a deposit requirement of £390k. How is this sustainable or achievable? It is likely we will see a big shift towards a New York style 'rent before you buy' model that will see a mass movement of 20-30 something year old first-time buyers into build to rent, private rent and co-living schemes. This has the potential to completely re-invent the housing model, market and prices for generations to come.

The fate of the housing market is in the hands of the Bank of England. Average mortgage rates have already shot up in the past six months due to base rate rises and could go up further. The simple fact is that the higher interest rates go, the less people will be able to borrow due to affordability criteria. This will inevitably hit house prices if Threadneedle Street ploughs ahead with more rate rises to contain inflation.

House prices don't tend to crash without mortgage finance drying up first, it's never that people don't want to buy property, it's that they aren't able to that blocks the demand. So, without there appearing to be any reason on the horizon for banks to suddenly stop lending, where does that leave property prices? My best guess (and let's face it that's all any of us can do when it comes to the UK property market!) is that we'll see prices plateau in the coming months, with a period of little or no increases (some areas may even see small negative growth numbers). This is mainly due to us starting to reach the top of lenders' affordability models, clients want to move but when we calculate the size of mortgage their incomes generate they end up short on the property they ideally want to move to, as well as a dwindling confidence as fears over the cost of living and increasing interest rates dominate the headlines.

The market is definitely cooling a little as the cost of living begins to bite and the rate of house price growth will almost certainly start to reflect this. However, it's still a busy market out there. Many people are waiting in the wings for prices to come down, so we are expecting a flurry of activity again in the latter states of the year.

Despite the growing number of doom and gloom prophecies, the housing market continues to defy logic and house prices continue to boom. Some analysts predicted the property market would be on its knees by now but despite an apparent perfect storm it still remains very buoyant. Without doubt, the squeeze on household spending will start to have an impact on demand and, in turn, prices, but several factors are counter balancing this. Housing stock remains very low, employment levels very high and though interest rates are rising, they are still at historically low levels. Add to this a surge in demand for holiday lets and second homes, coupled with the rush from first-time buyers to get onto the ladder ahead of the looming help-to-buy deadline, and I believe the market will remain strong until the end of the year at least. Beyond this, with further rate rises very likely and the jump in the energy price cap in October, then next year could be when any marked slowdown occurs. Even then, I certainly wouldn't predict a crash.