Economic forecasters have been predicting a crash in property prices for decades now, and recent times are no different. And yet still the opposite trend occurs. We ask – why are house prices rising?
Why Are House Prices Rising? The Main Reason
There has been a lot of discussion recently regarding the potential impact of factors like rising interest rates and growing cost of living on home prices.
In fact, the average asking price of a home in Great Britain climbed this month, reaching a new high of £371,158. Smaller than the five-year average for October and up significantly from the previous month, respectively.
The primary cause is that there are still more people looking to relocate than there are available houses to buy. This indicates that recent house sellers who listed their properties on the market did not feel the need to reduce their asking prices in order to generate interest from potential purchasers.
Concerns
Many people who are moving into new homes probably worry about the future of housing prices right now, especially in light of the current market uncertainty caused by the government’s mini-budget. No obvious changes have been observed in average prices, but the annual growth in asking prices is continuing to slow.
Why Are House Prices Rising? The Year So Far
Comparing the first few months of 2022 to the previous two incredibly busy years, we’ve already noticed a little decline in homebuyer demand. We’ve been heading towards a more “normal” kind of housing market since the pandemic “race for space” started to level out, which we last witnessed in 2019.
However, there are still more people wishing to relocate than there are available properties, which has kept prices from declining.
However, some people who were considering moving have delayed their plans as a result of the sharp increase in average mortgage interest rates. Demand decreased by 15% in the two weeks after the mini-budget compared to the same two weeks previous year. However, it remains greater than it was during the same time in 2019.
Stick Or Twist?
For a significant purchase like a home, it makes sense that some new movers who have the choice to wait might desire a clearer picture than what they’re now getting.
Those who can still afford to relocate may conclude that doing so will be more cost-effective than waiting too long given the uncertainties surrounding the direction of mortgage interest rates, especially if demand for homes continues to outpace the supply, which will sustain home values.
Will Prices Continue To Rise?
In November and December, it’s likely that we’ll observe a seasonal decline in average asking prices, which would be in line with what we often see at this time of year. However, further economic developments must take place before we can anticipate what will happen in 2023.
My forecast? After an unusually busy two years in the housing market, it will take some time for the market to settle in to a new, more “normal” level of activity. This is especially true given that new developments are currently occurring virtually every day.
