UK real estate prices slid down
June 7, 2023 10:22 amVideo
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Pound dipped in price as mortgage lender Halifax stated that house prices in the UK fell for the first time since 2012, highlighting headwinds for the real estate market, primarily due to the Bank of England continuing to raise interest rates.
The tight policy on borrowing costs, driven by excessive inflation in the country, affected not only the lending market but also other sectors, including real estate. Reportedly, the average house price fell by 1% in May, reaching £286,532. This decline follows a series of monthly decreases last year, briefly interrupted in the first three months of 2023. UK homes now cost 2.5% lower than its peak in August 2022.
The figures support the data published by the National Building Society, which indicated that house prices have resumed their decline in May. Halifax previously painted a more positive picture of the housing market than Nationwide, so now that both companies report price declines, it is clear that there is downward pressure on the market. Halifax also warned that the recent rise in mortgage rates will inevitably affect confidence in the housing market, as both buyers and sellers adjust their expectations.
A decline in real estate prices signals an impending recession in the economy, which the UK government managed to avoid last year. However, now that interest rates continue to rise and inflation remains three times above the target level, the risk of a more significant recession by the end of this year looms on the horizon.
A number of economists also warned that property prices in the UK could fall by 10% this year, although the acute shortage of supply and a stable labor market are still providing support.
As the Bank of England continues to undertake the most aggressive series of rate hikes since the late 1980s, and households are gradually experiencing problems as a result. The cost of borrowing has increased significantly, impacting people’s purchasing power, especially in the housing sector. It is estimated that 1.3 million people will be forced to refinance cheap fixed-rate deals at significantly higher rates currently offered by banking institutions.
Mortgage conditions are rising again, and investors continue to bet that the Bank of England has much more to do to achieve progressive results in the fight against high inflation. Rates on the most popular fixed-rate mortgage offering in the UK currently exceed 5% – a level that the Bank of England has identified as the pain threshold for consumers.
In terms of the forex market, euro is becoming bearish again, but seeing growth is not impossible. For this, the quote has to remain above 1.2425, as this will allow a rise beyond 1.2455, heading towards 1.2485 and 1.2515. In case of a decline around 1.2390, euro will fall to 1.2360 and 1.2340.
Pound has a brighter outlook as buyers continue to control the market. To see further growth, the quote has to stay above 1.0670 or consolidate above 1.0700. Only that will trigger a much larger rise to 1.0725 and 1.0750. In case there is a decline, bears will attempt to take 1.0670, which could lead to a fall to 1.0635 and 1.0595.
The material has been provided by InstaForex Company – www.instaforex.com
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