Despite the support that supply shortages have formed for the real estate market, high interest rates and the cost of living are driving potential buyers away from the UK property market. A Reuters survey shows that UK house prices are expected to fall by 4% this year, a drop greater than some institutions had previously expected.
During the COVID-19 pandemic, influenced by record-low interest rates and the shift to working from home, the average UK house price increased by more than 20%. However, as the Bank of England has raised interest rates more than ten times in a row, the cost of mortgages has risen sharply, gradually cooling down the UK real estate market.
A Reuters survey conducted from August 14 to 30 among 18 market experts shows that average UK house prices are expected to fall by 4% this year, a larger decline than the 3% predicted in the June survey. The most pessimistic forecast in the survey indicates an average house price tumble of 10% this year.
Michael McGill from real estate firm CBRE pointed out that the rising mortgage costs have negatively impacted affordability and have put downward pressure on house prices, market forward indicators continue to show a decline in buyer demand and negative price expectations.
Data released by the Bank of England on Wednesday showed that, in July, the decrease in the number of mortgage approvals from banks and building societies exceeded expectations. The real estate website Zoopla stated that the number of house purchases in the UK this year is expected to decrease by 21%, potentially reaching the lowest level since 2012.
The Reuters survey indicates that house prices in the London area are expected to decrease by 5% this year, but are expected to rise by 2% and 5% over the next two years, respectively. Real estate consultant Russell Quirk mentioned that the fluctuations in the London real estate market do not necessarily reflect the overall trend in the UK property market, and areas that are home to many luxury houses, such as Kensington, Mayfair, Barking, and Dagenham, even less so.
Data from the real estate website Rightmove shows that the average price of a house in London in August was £672,961 ($853,314), with the average price in Kensington being £1,667,486, and in Barking and Dagenham, the average price was £367,526.
The Reuters survey also shows that most respondents believe that residential rents will continue to rise, further exacerbating individuals' rental burdens. According to data from the UK's Office for National Statistics, up to July this year, private rental payments paid by tenants in the UK rose by 5.3% over 12 months.
Aneisha Beveridge from real estate brokerage Hamptons says that factors such as housing supply shortages and persistently high homebuying costs will drive UK house rents to continue to rise.
