House price crash warning: ‘Juggernaut cooling fast’ to collapse as ‘gloomy market’ | Personal Finance | Finance

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Experts have told Express.co.uk that the housing market is starting to feel the bite of the cost of living. Prices have dropped for the first month according to Rightmove and Halifax. Rightmove said the average price of a UK property fell by 1.3 per cent, or £4,795, to £365,173 in August. The Halifax House Price Index fell by 0.1 per cent in July with a monthly fall of £365.

While average wages rose by 4.7 per cent between April and June, the Office for National Statistics (ONS) cut the “real value” of wages by 3 per cent.

Average two-year and five-year fixed mortgage rates rose 0.4 percent and 0.52 percent, respectively, in July.

Inflation also rose to a 40-year high of 10.1 per cent, according to ONS estimates on Wednesday, above the 9.8 per cent consensus and up from 9.4 per cent in June.

The Bank of England expects inflation to rise by 13.3% in October, while energy bills are expected to rise to £3,523 on October 1, according to Investec.

Home price growth slowed to 7.8 percent from 12.8 percent in May to June, one of the sharpest monthly declines in a year, driven by the average cost of living and mortgage rates, as well as falling “real” wages. Growth recorded by the ONS.

Jonathan Hopper, chief executive of Garrington Property Seekers, has now told Express.co.uk that “the tyranny of rising house prices is slowing down significantly”.

The UK housing market has been called a 'juggernaut in rapid decline'

The UK housing market has been called a ‘juggernaut in rapid decline’ (Image: GETTY)

According to Rightmove and Halifax, the price has been reduced for the first month

According to Rightmove and Halifax, the price has been reduced for the first month (Image: EXPRESS)

Mr Hopper told Express.co.uk: “The average price paid for a house increased by 1 per cent between May and June.

While that’s a strong jump and the eighth consecutive monthly increase in values, it’s smaller than the 5.7 percent increase seen in June 2021.

“This comparison to the explosive growth seen a year ago goes some way to explaining why today’s headline figures are flat.

But the decline is no statistical anomaly. The gravity of the economy is catching up with the once overheated property market.

Read more: Home price growth has been decelerating since the 2008 credit crisis.

Jonathan Hopper

“Economic gravity is interacting with an overheated property market,” Jonathan Hopper said. (Image: GETTY)

The 'dark market' has 'shifted to sellers looking for top buyers'.

The ‘dark market’ has ‘shifted to sellers looking for top buyers’. (Image: GETTY)

The chief executive of Garrington Property Seekers continued: “Instead of entering the traditional summer break, the property market has been shocked by the gathering clouds of recession in recent months, and has become ‘all change’ for buyers and sellers.

“With consumer inflation now at a 40-year high and Britons’ real-time earnings falling at the fastest pace on record, confidence is waning – and this is quickly reversing the familiar post-pandemic changes.”

“Sellers have become very flexible in their pricing, with many looking to agree a deal quickly before the market softens.

“Meanwhile, buyers are becoming more measured in their approach to negotiations, which means looking for discounts to serve as a comfort buffer to offset unknown risks.

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Charlie Huggins says 'Rising prices in recent years mean home buyers are borrowing more.'

Charlie Huggins says ‘Rising prices in recent years mean home buyers are borrowing more.’ (Image: GETTY)

“With housing shortages still severe in many areas, we’re seeing retirement-age sellers enter the market not only to reduce the number, but also to unlock equity and access to a less energy-efficient home. Low running costs. As a result, some houses with an A, B or C EPC rating are starting to attract a premium.

“Transactions are still woefully slow and conveyancers and mortgage providers are under increasing pressure from home owners who are either willing or afraid to refinance.

“From a bearish market driven by sellers looking for high prices, the market has now shifted to sellers looking for ‘high buyers’. Certainty and flexibility have become tradable commodities during negotiations. Buyers who offer these benefits are able to get price discounts in return – something that was rarely seen three months ago.

Persimmon, one of the UK’s leading housebuilders, reported revenues of £1.69 billion in the first half of 2022, but with a warning that the company “does not control its own destiny” over house prices.

'If interest rates keep rising, it's hard to see how the housing market can be defended.'

‘If interest rates keep rising, it’s hard to see how the housing market can be defended.’ (Image: EXPRESS)

Persimmon delivered 6,652 homes in six months at an average selling price of £245,597.

He pointed out that inflation is currently running between 8 and 10 percent, but that “sales price inflation is currently undercutting that.”

Charlie Huggins, head of equities at Wealth Club, told express.co.uk that house prices were “remarkably strong since the start of the pandemic” thanks to savings and cheap mortgages.

Mr Huggins said: “Persimmon has poured cash into this area and is returning a record amount to shareholders.

But make no mistake – the biggest reason for Persimmon’s success is high home prices and the overall strength of the housing market.

“This is something we have no control over, and it can change. Rising house prices in recent years have meant that home buyers have to borrow more to afford a home.”

“Combine that with rising interest rates, which will ultimately mean more expensive mortgages, and property affordability could drop significantly. If interest rates continue to rise, it’s hard to see how the housing market can defend itself.”

“For now, Persimmon is a cash machine. But as construction costs rise, they need house prices to keep rising, or margins will come under pressure.

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