House prices flatline in January

Data this morning isn’t good news, it’s less bad. Rates have still got another 0.5% to rise and the central bank has indicated they will let them linger up there for longer than necessary to ensure inflation isn’t here to stay. The bank also predicts a recession lasting over a year, although not as sharp as previously thought. Considering the banks record on predicting the future, I wouldn’t rule out a sharp recession and by keeping rates high for longer they are also certainly sealing the fate of the housing market in 2023. Stay away unless you’re forced to buy or sell.

Our advisers have seen in January a similar attitude towards current economic news as they did within COVID, which is life will go on.

In October and November we very much saw a watch and wait approach, with consumers wondering "how high could they go" with regards to interest rates.

It's important to say that for a lot of homeowner's and would be homeowners haven't yet felt the full effect of inflationary pressures , however we have seen wage growth higher than predicted which has helped some.

I do believe there is more to come in terms of reductions, but not as serious as perhaps we thought. I always keep an eye on what mortgage lenders are providing for products, and we have a reasonably full range of deals up to 95% Loan to value (LTV). If there was a genuine 20-30% discount on prices on the horizon, I don't think the lenders would support mortgages to that level. With the continued shortage of properties around the UK, and the cost of alternatives such as private renting also becoming more expensive, home ownership is still seen as an affordable option, even in today's market.

In the coming months, we can expect more flat months like January, which is not a bad thing. There is no longer excessive demand for each new property that enters the market, which has historically pushed up offers and prices. Properties appear to be priced to sell. This is evidenced by the lack of downward valuations. Previous forecasts of price drops of more than 20% appear increasingly unlikely, but we are only in January. A lot of things can still happen.

The news from Halifax is positive to some it's not a surprise to us in the industry. The over-inflated sales of 2022 have stopped - no longer are clients offering above asking price levels. There is still demand out there but some clients still believe that prices will fall dramatically and are waiting to take advantage. However, with this pent-up demand I don't think we'll see a dramatic collapse in house prices, especially with the Bank of England's view on inflation. However, I think it's too early to say there won't be any further fall in prices but, if there are no external factors, then we'll certainly see this plateau continue for a while longer.

The property market has always been more robust than many people assume, but it is important not to jump to wild conclusions early on in the year. What this does show is that demand is still strong whilst supply is still nowhere near where it should be, and with mortgage rates down falling to more realistic levels, inflation starting to drift down and fuel prices lower, there is room for some cautious optimism.
Flatlining is now the more likely scenario for house prices over the course of the year and prices will differ as regionalisation becomes more pronounced. Overall house prices look set to perhaps fall no more than 5% overall, with some areas faring above or below that level.
Activity is definitely up and those looking to buy will find that the first half of the year is the optimum time to do so.