However, according to Nicky Stevenson, MD of Fine & Country UK, “any reset of the property market is expected to be slow and gradual as demand for property remains considerably above pre-pandemic levels.”
She says: “At just 0.1% in May, Hometrack report month-on-month price growth fell to its lowest rate since December 2019, while the pace of price growth for newly-marketed properties continues to slow. Nationwide report annual house price growth in June is 10.7%, the fourth month in succession of price growth moderation, while mortgage approvals in both April and May have pared back to pre-pandemic levels.
"With the volume of new supply to the market edging upwards and rising mortgage rates set to cause a greater degree of price sensitivity in the market in coming months, more balance is returning."
She notes that demand for properties continues, and sales volumes continue to hold firm, adding: “According to HMRC, when seasonally adjusted, over 109,000 sales took place in May, 12% higher than the pre-Covid average between 2015 and 2019. Over 540,000 sales have taken place in the first five months of 2022, 7% higher than the average between 2015 and 2019."
Financial data reveals that the UK economy contracted in both April and March following zero growth in February, the first time the economy has stalled in a three-month period since the height of the pandemic. Against this backdrop, the British Chamber of Commerce (BCC) and OECD have both downgraded their forecasts for UK economic growth.
The BCC now predict growth of 1.8% in 2022, down sharply from 3.5% in its previous forecast. Meanwhile, the OECD predicts growth of 3.6% in 2022, which is down from 4.7%, with zero growth in 2023, down from the previously predicted 2.1%. Although growth is still expected this year, spiralling inflation and interest rates on the rise mean that concerns over a recession are starting to mount.
Stevenson says that the Bank of England has raised the base rate of interest to 1.25% in June, the fifth rate rise in succession, as rising costs pushed inflation to a 40-year high of 9.1% in the 12 months to May.
She says: “It is predicted this could well reach 11% by October when the energy price cap is set to rise again. Although average wages continue to rise, in real terms pay is falling as pay increases are subsumed by the cost of living rises. According to research by ONS, over 40% of adults are buying less food than usual as the squeeze continues."
Stevenson notes that the long-awaited initial findings of the 2021 Census have finally been published.
She explains: “Conducted on the 21st of March 2021, data from this census will provide a unique snapshot in time as people began to emerge from the third national lockdown. One of the reasons behind the consistent demand for housing is population growth. At 59.6 million, the population of England and Wales was the largest ever recorded through a census, having grown by 3.5 million, up 6.3% since the last census in 2011. The number of households also increased by just over 6%, rising by 1.4 million to 24.8 million.
Stevenson concludes: “Data from the census indicates that the East of England and South West England have proportionally seen the most significant increases in population, with rises of 8.3% and 7.8% respectively. Unsurprisingly, they also top the league for household growth. By size of its population, the South East is the largest region with 9.3 million, followed by London with 8.8 million. These two regions account for 30% of the total population of England and Wales."
