Price correction could be in store for property market
How will further interest rate rises, rocketing inflation and a predicted recession impact the Yorkshire housing market?
Here, Mark Manning, managing director of estate agency group, Manning Stainton, gives his forecast for the market over the next 12 months:
“You can’t read the news at the moment without feeling worried about what’s in store for us all over the next few months.
“Inflation is soaring, we’re facing a cost-of-living crisis due to rising energy, fuel and food prices, and economists are now predicting a recession in 2023.
“However, one area of the UK economy not yet showing any signs of suffering is the housing market, which is continuing to perform.
“It feels like the market is the Rocky Balboa of the boxing world, the fighter that keeps getting hit but somehow stays standing even under the weight of pressure.
“Over the past month we have seen the level of new listings and sales change very little from where they were in 2021, and the average price of properties we sold is almost five per cent higher than it was at the start of the year.
“The market is still growing despite repeated hits but why and what’s in store for the rest of the year?
“Firstly, let’s talk about why it’s still performing. The biggest factor behind the market’s growth is that demand has been far outstripping supply, which has created intense competition and pushed prices up.
“The pandemic also made people reassess their living situations, which caused an influx of buyers looking to trade up, and this caused a huge surge in activity levels.
“However, now interest rates have risen again, I am expecting to see a slight reduction in the number of buyers willing to make their next purchase.
This will inevitably lead to an increase in available properties and provide buyers with more choice, enabling some people who have felt shut out of the market due to intense competition to think about entering or trading up.
“I think rising living costs will also begin to have an impact on the number of buyers looking to move, and I believe this will be felt more acutely as we enter the winter months and people begin to be hit with large energy bills and increased grocery costs.
“The gloomy reporting about the economy will also put some people off buying over the coming months, which again will begin to reduce competition slightly.
Essentially, I think all these factors combined mean that we are reaching a housing market peak and the net result of this will be a slight market cool down.
“I think we will see price growth begin to slow and the market will return to a more usual state over the next few months, following two intense years of growth and record house price highs.
“However, prices won’t drop, they just won’t rise as fast or as dramatically as they have done over the past two years.
“This will result in a market price correction that will allow new people to enter the market.
“This is a good thing, as firsttime-buyers in particular are essential to the health of the market. Less competition and slower price growth will make them feel more confident about buying.
“Despite us all being in for a tough ride economically, the housing market has become somewhat detached from the wider economy and will continue to perform well, albeit it slightly slower as we enter 2023.”