As the summer holidays approach, those in the property sector are bracing themselves for a turbulent time. Amidst talks of house price crashes, record repossessions, and landlords leaving the market, it’s crucial to separate fact from fiction. While it is likely that sale prices may erode by around 5% before the end of the year, the real concern lies in the decreasing number of property sales. Many homeowners are adopting a wait-and-see approach, hesitant to reduce their prices enough to attract the dwindling pool of buyers. This paints a bleak picture for estate agents, who may face an even more challenging Winter market without the necessary financial reserves.
In the rental market, borrowing rates are expected to rise, leading to a reduction in rental property supply as landlords opt to sell rather than face the challenges ahead. This poses challenges for tenants, who can anticipate further rent increases, albeit at a slower rate. Landlords, already grappling with mortgage payments that barely cover the interest, are reconsidering their position. While more landlords may attempt to exit the market, the number may not be as high as initially feared, as declining capital values and saleability encourage a wait-and-see approach.
Despite hopes for an interest rate war to drive down mortgage rates, the market’s current gloom has resulted in the opposite effect. Rates have risen even before the Bank of England’s base rate hike, creating a worrying trend of increasing mortgage expenses. As we enter the second half of the year, mortgages are expected to become even more costly, with higher rates becoming the new normal.
Looking ahead to the next six months, the property market typically experiences a dip in sales during the holiday season, intensifying the downward pressure on prices. The usual September bounce is anticipated to be subdued, as higher interest rates take their toll. Existing homeowners are less likely to upgrade, and landlords, especially those reliant on mortgages, are not expected to contribute significantly to their portfolios, with many opting to exit the market altogether and sell during the autumn season.
While a price freefall is unlikely given the current circumstances, the increased property supply coupled with declining buyer numbers will inevitably lead to anxious sellers slashing prices in an attempt to attract the diminishing pool of purchasers. As we navigate through the property market, it appears that a very challenging winter lies ahead.