3 July, 2023 | Investment Oracle
After a tremendous year of growth, the UK housing market is now entering a phase of stabilization. Recent data from the Office for National Statistics (ONS) indicates a healthy increase of 3.5 per cent in house prices over the past year, only slightly lower than the 4.1 per cent rise seen in the previous month of March.
Cooling Off with Optimism
The Express reports an intriguing trend in the nation’s major building societies and real estate platforms – a noticeable decrease in asking prices, reaching levels unseen in over a decade.
This offers a unique opportunity for potential homeowners as the average price of a typical UK property in April stood at an affordable £286,000.
Although this figure represents a £9,000 increase from the previous year, it still remains significantly lower than the peak of £293,000 in September 2022.
It’s important to note that the state of the market varies significantly depending on location.
Changing Dynamics of the UK Housing Market
Adding to the array of variables affecting the housing market, the Bank of England has implemented interest rate hikes as a means of combatting inflation. These adjustments have a direct impact on borrowing costs for potential homeowners, leading to further changes in the market dynamics.
Regional Disparities
One striking aspect of the UK’s housing market is the lack of uniformity across the country.
The North East has experienced an impressive surge of 5.5 per cent in house prices, resulting in a current average of £160,000.
Conversely, the increase in London was more modest at 2.4 per cent, with the average price reaching £534,000. Looking at the local level, the disparities become even more pronounced.
During the year leading up to April, 27 local authorities witnessed a decline in average house prices. Notably, Kensington and Chelsea in London experienced the most significant year-on-year drop among any local authority, with prices falling by a substantial 15.8 per cent compared to the previous year.
This downward trend has been consistent, with a decrease of 9.3 per cent in March, 4.2 per cent in February, and 2.3 per cent in January, indicating a situation that demands attention. Westminster followed with a significant drop of 13.3 per cent, Na h-Eileanan Siar with 7.4 per cent, and the City of Aberdeen with 7 per cent. To understand the situation in your specific location, you can refer to our interactive map.
Emerging Property Hotspots
As certain areas experience declining prices, others become the centre of remarkable growth.
East Lothian, located just east of Edinburgh, currently holds the position of being the UK’s property hotspot. House prices there witnessed an impressive surge of 17.2 per cent in April, building upon the increases of 9 per cent in March and 5 per cent in February.
Following suit, Fylde in Lancashire experienced the next highest annual increase at 15.5 per cent, up from 14.9 per cent in March. This positive trend extends to other areas such as Melton (13.3 per cent), Swindon (12.4 per cent), Inverclyde (12 per cent), West Devon (11.7 per cent), and Merthyr Tydfil (11.6 per cent).
These emerging hotspots offer exciting investment opportunities.
Interest Rate Hikes and Creating Certainty
Despite localised price fluctuations, the overall housing market faces a level of uncertainty due to the Bank of England’s interest rate hikes. However, it’s crucial to remain optimistic as these adjustments aim to create stability and sustainable growth.
The average two-year fixed mortgage rate has recently surpassed six percent for the first time this year, indicating the market’s resilience in the face of challenges.
While interest rates are expected to rise further due to the latest hike taking the base rate to five per cent, it should ultimately contribute to a balanced and secure housing market.
The UK housing market’s current cooling-off period presents both challenges and opportunities for potential homeowners. Regional disparities, emerging property hotspots, and interest rate hikes all contribute to the evolving dynamics of the market.
Despite uncertainties, adopting an optimistic outlook and staying informed can help individuals make well-informed decisions in their pursuit of finding the perfect home.