The introduction of the SDLT (Stamp Duty) holiday sparked a frenzy in the housing market. Realistically, it was only to be expected that the end of the tax break would lead to a slowdown. Just like people, there’s a limit to how long markets can run at maximum speed.
The key question, however, is, how much has the market slowed down? In other words, is it still a seller’s market or do buyers now hold the upper hand?
Sellers’ markets vs buyers’ markets
It can sometimes be very hard to judge whether the UK’s housing market favours buyers or sellers. There are three main reasons for this. Firstly, the UK’s housing market is made up of multiple local markets. In fact, local markets can often be subdivided into micro-markets. Secondly, all sellers and buyers are individuals. That means some will be under more pressure to move than others.
Thirdly, there are multiple factors that can influence the general direction of the housing market. Again, the impact of at least some of these factors can, and often do, vary from one place to another. For example, overall employment may be trending upwards but a specific area may just have lost a major employer or vice versa.
With all that said, there are still indicators that can suggest the overall direction of the housing market. Here is a quick guide to some of them and how they look at the moment.
Inflation
Inflation effectively tends to favour sellers because it can make buyers feel under more pressure to move. This could be more psychological than practical (fear of missing out). In many cases, however, there can be a strong practical element to it.
A rising tide floats all boats. In the context of the housing market, that means house prices go up across the board. That means buyers either need to buy a smaller property (if that’s possible) or pay more. Paying more requires a bigger deposit and/or a higher loan-to-vehicle ratio. Neither of these is a good prospect for buyers.
Inflation can also encourage sellers to become more determined to achieve the maximum, possible sales price themselves. Again, in some cases, this may be a matter of necessity. If a seller is also a buyer, then the same inflationary pressures will apply to them.
Interest rates
Lower interest rates make it harder to save for deposits but easier to afford mortgages. Even though lenders have to consider the impact of rate increases, those increases would still be coming from a very low base. The deposit is still a relatively small part of the cost of a house, therefore, overall, lower interest rates tend to be beneficial for sellers.
By making it easier for people to afford mortgages, lower interest rates can help to increase the pool of potential buyers. This helps to stimulate competition between buyers and hence can push up prices.
Again, however, this is something of a double-edged sword in that it applies to sellers who are also buyers. With that said, onward movers who have built up equity in their homes may find it easier to put up a substantial deposit on a new property.
The job market
It will probably take until early 2023 at least before there is a clear picture of the core health of the UK’s job market. At present, the UK, like many other countries, is still on the rebound from the impact of COVID19. Also, many companies take on extra staff over the festive season. Healthy job markets also tend to benefit sellers as they make it easier for people both to save for deposits and to afford mortgages.
The overall picture
Right now, the overall picture in the UK is still broadly favouring sellers. It is, however, very possible that will change in the near future if the economy slows down. This could result in a reduction in buyers as people become less willing and/or able to commit to mortgages.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
Commentaires