The housing market has had to cope with a lot over the past couple of years, from its pandemic closure in March 2020 to the reversal of the stamp duty cut last September and five interest rate rises in a row since December.
Now we have a cost-of-living squeeze and government in turmoil, with a sitting prime minister with an 80-seat majority and his potential successors damaging themselves in a leadership contest that some have likened to a circular firing squad.
So how’s the market coping with this latest challenge?
You will know that the general view of housing market commentators, including this one, is that the market will slow in the second half of the year.
Well, we are now in the second half, if only just, and you would be hard pressed to find evidence of that slowdown yet.
I think when people talk about the second half, they have in mind the autumn, which is more accurately closer to the final quarter of the year rather than the second half, but even so,
Recent evidence suggests anything but a slowdown.
The Halifax, reporting its house price index on July 7, said that house prices rose by a stonking 1.8% in June, lifting them by 13% on a year earlier, the fastest rate of increase since late 2004.
Halifax noted the “resilience” of the market.
“The UK housing market defied any expectations of a slowdown, with average property prices up 1.8% in June, the biggest monthly rise since early 2007,” said Russell Galley, Halifax managing director.
“This means house prices have now risen every month over the last year and are up by 6.8% or £18,849 in cash terms so far in 2022, pushing the typical UK house price to another record high of £294,845.
The supply-demand imbalance continues to be the reason house prices are rising so sharply.
Demand is still strong – though activity levels have slowed to be in line with pre-Covid averages – while the stock of available properties for sale remains extremely low.
Property prices so far appear to have been largely insulated from the cost-of-living squeeze.”
The just-published e.surv-Acadata house price index told a similar story.
It showed that prices nationally (for England and Wales) rose by 0.8% in June and were up by 10.9% on a year earlier, or 12% excluding London and the South East.
“What is clear in our data is that house price growth remains resilient notwithstanding the pressures in the broader economy,” says Richard Sexton of e.surv.
“This is possibly because the squeeze on the cost-of-living is not yet being absorbed equally across society.
Homeowners, for now, are relatively unscathed.
Indeed, arrears figures remain at historic lows.
Housing, as an asset group, continues to outperform other classes and so remains attractive to investors – particularly good quality properties.
As ever a lack of supply of desirable stock and strong employment in the UK economy continues to support price growth.”
Acadata, which prepares the figures, noted that “the predicted slowing in the market has yet to take place” and also urged caution in interpreting data for transactions in coming months because of conveyancing delays.
Persimmon, the housebuilder, in a recent trading update, reported that completions in the first half of the year, 6,652, were 10% lower than in the corresponding period of last year, but that this was a problem of supply, including planning delays and material and labour shortages, not demand.
“Demand across the UK remains strong,” it said.
“During the first six months of the year, the Group’s average private weekly sales rate per site was around 1% ahead of that achieved during the same period in 2021.
Customer enquiry levels are healthy and cancellation rates low.”
Where does all this leave the housing forecasters?
The Centre for Economics and Business Research (CEBR) in a new Housing Prospects report, has revised up its prediction for price growth this year from 5.8% to 6.9% in the context of the market’s resilience.
But it is sticking to its guns in prediction a 3.7% fall in prices next year, up from a previous forecast of a 3.4% reduction.
“UK unemployment is expected to tick up over the coming quarters, rising from its current level of 3.8% to a peak of 4.5% in Q2 2023,” it says.
“Whilst relatively moderate, this forecasted uptick in unemployment is likely to reduce average household earnings, with negative knock-on implications for housing market demand and prices.”
On this view, the big slowdown has been delayed rather than cancelled.
It may be right.
But, given the market’s resilience, you would not necessarily want to bet against it continuing to hold up better than the forecasters expect.