Land Registry HPI – reaction from estate agents and brokers

Below, a selection of estate agents and mortgage brokers comment on the Land Registry House Price Index (September) published this morning:

Dariusz Karpowicz, director of Doncaster-based Albion Financial Advice“Though the stamp duty holiday has skewed this data, property values are coming down and that trend looks set to continue with inflation at 11.1% and the economy on the brink of recession. However, I’m not convinced that house prices will fall by as much as 20%-30%, as some are predicting. That would be an apocalyptic event in the property market. Prices will undoubtedly stall and we could see drops of 10% in some areas but the lack of supply will act as a glass floor under property values. There is a significant shortage of skilled workers and labourers, which limits the number of properties that can be built, which in turn prevents prices from falling materially as there just aren’t enough homes. Demand will drop off for sure, but let’s not forget that there is an acute lack of supply.”

Ross Boyd, founder of the always-on mortgage comparison platform,“To say the outlook is uncertain is an understatement. With inflation now over 11%, and mortgage rates on a different plane to where they were just six months ago, 2023 could be like 2008 all over again for the property market. Demand dropped off a cliff in October as mortgage rates soared following the mini-Budget and people took stock, but bank rate rising to 3% will see many people firmly batten down the hatches. It’s not inconceivable that average UK house prices could drop by 10%-15% over the course of the next year or two as we enter what the Bank of England predicts will be the longest recession since records began. Much will depend, of course, on how the jobs market holds up. Winter is coming.”

Paul Holland, mortgage broker at Chatham-based Henchurch Lane Financial Services“The property market has seen gargantuan price growth over the past 2-3 years. Healthy and sustainable house price growth is annual growth of circa 2%-3%, not 10%+. When that happens, the wheels invariably come off. The growth we’ve seen is mainly due to the stamp duty holiday introduced in the summer of 2020 and demand across the board from people wanting to relocate due to the pandemic. Of course we expect a downturn in prices over the coming 12 months, but this should be viewed more as a correction than anything negative. The most likely outcome is a 5%-10% reduction over the coming year. Unless you purchased at 95% last year and intend to sell quickly, this shouldn’t be viewed as too precarious a situation. There will also be some really good buying opportunities for those who are in the right position during the next year or so as prices come down, especially first-time buyers. Assuming they can find the still sizeable deposit, of course.”

Andrew Montlake, managing director of the UK-wide mortgage broker, Coreco: “I’ve never seen property market sentiment change in such a short timeframe. The property market was hit for six after the now infamous mini-Budget as mortgage rates soared and many people put their buying plans on hold due to the extreme political uncertainty. House prices are set to come under further pressure during the winter months, but the sizeable drops of 10%-15% that some are predicting are frankly implausible given the sheer lack of supply and the fact that the jobs market is still strong. A nationwide correction of around 10% is a real possibility after last week’s rate rise by the Bank of England. In reality, a fall of 10% is just the froth coming off the market and a reversal of the unsustainable growth we have had since the Stamp Duty holiday mid-pandemic.”

David Robinson, co-founder and wealth manager at London-based Wildcat Law: “When it comes to the housing market, we are going back to the early 1990s. We are in for a long and drawn out fall in house prices rather than the big drops we saw during the Global Financial Crisis of late 2007 and 2008. However, like the 90s. inflation will mean that the real price of properties will fall much further in real terms. The real losers will be pensioners living in detached houses looking to downsize who may not be able to find buyers able to raise mortgages, and people who bought new builds under Help to Buy, which have already shed significant value and are facing the spectre of negative equity.”

Andrew Simmonds, director at Bristol-based Parker’s Estate Agents: “Since the summer, I’ve been telling vendors that their house is worth what it was worth 12 months ago. I’ve lost instructions because they’ve said “nah”. This is mainly because of deluded competitors who feed them bull. Plenty have since come back to me saying “you were right”. I’m expecting average prices to be down 20% by March.”

Natalie Hines, founder at Sutton Coldfield-based Premier One Mortgages: “Over the past six weeks or so, there has been a definitive slowdown in purchase activity so I’m fully expecting a drop in prices during the year ahead. Sentiment has been hit hard by rising interest rates and people’s buying power is no longer what it used to be. I certainly don’t think we’ll see the 20%+ drop in house prices some are predicting, as that would put the entire economy on the brink, but prices are without doubt coming down. I work with a young demographic within the TV industry and they are waiting to see what happens following the latest interest rate announcements and ongoing cost of living crisis. A correction in house prices is what’s needed to help get first-time buyers on the property ladder. For many first-time buyers, prices have been out of reach for so long. A house price correction could give them the leg-up onto the ladder that they need. How the jobs market holds up in the next year or so will be key.”

Jon Halbert, mortgage and protection adviser at Ormskirk-based Key Financial Associates“House prices falls are a nailed-on certainty. It’s not so much headwinds the property market is facing but a hurricane. As demand for property drops off due to the Bank of England’s rate hikes, sales will inevitably slump. But this alone will not reduce property prices. When people become desperate to sell and reduce the sale price of their home below that of the current market value, all the homes in the same street reduce in value to the same level. This is the domino effect that triggers house price falls. The rising cost of borrowing will force a growing number of homeowners to sell because their affordability on the new rates when they come to remortgage, coupled with the cost of living, will become impossible. Repossessions will also rise as a result of recent rate rises. If lenders relax their criteria around interest-only mortgages, many will be able to survive potential repossession.”

Hannah Bashford, director of Devon-based Model Financial Solutions“The past couple of years have seen house prices hit new heights, growing in double digits across the board due to the stamp duty holiday and the race for space triggered by the pandemic. This price growth was never sustainable and has ultimately proved a way of crippling the UK economy because people leveraged themselves up to the hilt on cheap money, and now money is no longer cheap. Add the cost of living crisis to the impending remortgage crunch and the only way house prices can go is down. I don’t believe that we will see a drop of 20%+ that some have forecast, as the economy would be on the verge of systemic collapse, with countless households in negative equity. But it’s inevitable that prices will need to come down so that people can meet the affordability assessments. Average prices remain near record highs for now, but they’re unlikely to stay there for much longer.”

Elliott Benson, mortgage broker at Sett Mortgages“The mini-Budget, or at at least what happened after it, hit sentiment like a sledgehammer. And even though we all knew the latest interest rate rise was coming, it will still have proved a further shock to many homeowners, especially those who took out sizeable mortgages at record low rates. Higher rates mean people won’t be able to borrow as much, which in turn means they won’t be able to offer as much for property. House prices will invariably head south during the next 12 months as people adjust to the new rate environment. I would advise anyone who is still thinking of buying or remortgaging to keep calm, seek professional advice and take the right decision for their own circumstances. Never has independent mortgage advice been more important.”

Sofia Jones, Managing Director at London-based independent mortgage broker, Penny House“Few will be surprised at the slowdown in price growth Over the past five to six weeks, since the now infamous mini-Budget, demand from buyers understandably dropped off a cliff as mortgage rates shot up and the government fell into chaos. Where we were active in October was with requests to remortgage as people sought to protect themselves as best they can. We’re predicting a busier November and December as buyers who held off in October amid the chaos decide to move forward with their purchases, as they see lenders reducing their fixed rate deals across the board.”

Austyn Johnson, founder at Colchester-based Mortgages for Actors: “Although the base rate is still not that high when compared to 15-20 years ago, such a sharp and sudden hike for those who have been fixed very low for very long will leave them reeling at the change. Movers will be wary of moving and buyers will be wary of buying. Prices can only come down as people’s borrowing power is reduced and sentiment is hit hard. Almost all borrowers will be affected, but worst hit will be the people whose fixed rate ends in the next few months. Some people could see their monthly mortgage payment double. People on variable rates, especially portfolio landlords, will need to get the ball rolling ASAP as they will have increasing costs across their whole portfolio.”

Riz Malik, director of Southend-on-Sea-based R3 Mortgages: “House prices have been rising faster than wages for a number of years, due to the ultra-low interest rate environment making it cheap to borrow money and the stamp duty holiday introduced during the pandemic. But recent rate hikes, political ineptitude and soaring inflation have accelerated the inevitable correction. If the housing market drops 30%, as some are predicting, Rishi can forget winning the next General Election and may as well join Matt Hancock on I’m a Celebrity. The number of people facing negative equity and repossessions would go through the roof. Our new PM, fortunately, is a clever guy. If anyone can find a solution to our current economic predicament that has been exacerbated by the previous short-lived administration, it is Rishi Sunak.”

Malcolm Davidson, Director of Hull-based broker, UK Moneyman: “Property prices have risen approx 20% since Covid, which is not sustainable. The so-called experts predicting extreme price falls without fail underestimate the demand for property in the UK. And especially the desire of tenants to get out of the overpriced rental market and own their own homes. Real crashes are predicted all the time but they’ve only ever happened about twice. Everybody is ultimately guessing, as nobody knows. Also, now that Help to Buy has ended, the impact of this is underestimated and re-sale values will be supported by its withdrawal.”

Graham Cox, founder of the Bristol-based broker,“My best guess is house prices will fall 15%-20% in 2023. Affordability, for first-time buyers is much tighter, affecting the whole market. Unable to borrow as much, prospective buyers will either wait or offer less. Anyone coming to the end of their dirt cheap fixed-rate deal and unable to afford the higher remortgage rates on offer will be a very motivated seller. Many will reduce their asking prices significantly for a fast sale, causing prices to fall sharply.”

Lewis Shaw, founder of Teesside-based Riverside Mortgages: “For us, the phone in October was red hot with panic-stricken clients worrying about their mortgages. Thankfully most had nothing to worry about as they’re tied into longer-term fixed rates. However, first-time buyers have decided to keep their powder dry in the hopes that both house prices and mortgage rates will fall. The biggest problem is consumer confidence because if everyone assumes prices will fall, then guess what, prices will fall. So the most likely outcome is a 10% price fall over the next year. So if everyone offers 10% lower and you get your home for 10% lower, then no one is really out of pocket.”

UK newswire, Newspage, also polled 250 mortgage brokers and estate agents about how far they think prices will fall during the next 12-18 months. The results were:

  • 58% believe prices will fall by up to 10%
  • 27% believe prices will fall by between 10% and 20%
  • 8% believe prices will fall by 20%+
  • 4% believe prices will not fall
  • 3% were unsure

Jukka VäänänenCEO, Newspage, commented: “These poll results suggest that most people in the property and mortgage world believe we are in for a house price correction rather than a crash. The consensus seems to be that we will be back where we were pre-pandemic, before the stamp duty holiday and availability of ultra-cheap mortgage finance sent house prices spiralling upwards.”

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