UK housing market showing signs of slowdown

The housing market in the United Kingdom is showing signs of slowing down as inflation and rising interest rates rein in buyers, the country’s biggest housebuilder, Barratt Developments and Lloyds Banking Group’s Halifax have warned.

According to the latest Halifax house price index, the annual rate of growth for UK house prices slowed in August to 11.5 percent as compared to 11.8 percent in July. The average price of a home was £294,260 in August, 0.4 percent higher than the previous month.

“While house prices have so far proved to be resilient in the face of growing economic uncertainty, industry surveys point towards cooling expectations across the majority of UK regions,” said Kim Kinnaird, Director at Halifax Mortgages.

Kinnaird further indicated that the slowdown could be attributed to many variables. An easing in buyer demand caused by rising inflation, widely expected interest rate hikes combined with with the looming increase in energy costs next month, will likely put further strain on household budgets and reduce what prospective homebuyers can afford to borrow, Kinnaird warned.

“With house price to income affordability ratios already historically high, a more challenging period for house prices should be expected. House prices have so far proved to be resilient in the face of growing economic uncertainty,” Kinnaird noted. However, she added: “Industry surveys point towards cooling expectations across the majority of UK regions, as buyer demand eases, and other forward-looking indicators also imply a likely slowdown in market activity.”

In the midst of UK housing market slowdown, Halifax and Barratt warn of challenges ahead.

In the meantime, Barratt provided further evidence of a slowdown in the housing market, pointing out that the number of homes reserved each week until the end of August had fallen below the level of a year earlier, and was now lower than before the coronavirus pandemic.

Releasing its annual results to investors, Coalville-based residential property developer said this was related to limited supply of homes, combined with “heightened macroeconomic uncertainty”, adding that it expects house price growth to moderate.

“We recognise that significant macroeconomic uncertainties remain, most notably around inflation, energy costs and interest rates, and their impacts on UK economic growth, employment, and consumer confidence and spending,” said chief executive David Thomas in a statement.

Baratt said demand for new homes remained strong, but there were clear indications that heat was dissipating from the housing market.

Despite these warnings, few analysts expect house prices to tumble any time soon, and they may even get some support from a squeeze on the supply of new properties on the market.

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