Weekly Roundup: 28th November 2022: What’s the deal with housing?
Charity Agasaro - 28th November 2022
According to mortgage lender Nationwide, UK house prices have declined for the first time in 15 months, the biggest fall since 2020. The drop comes at a turbulent time for the UK housing market. During the pandemic, a demand for homes that outweighed the number of homes available led to a steep increase in average house prices. As a result, UK residents were given a tax holiday on stamp duty to keep the market moving. Yet this holiday ended in September 2021, and it’s abrupt end overlapped with the removal of other protections that were created to sustain the housing market. As a result, sales and mortgage applications have reduced since September.
The market also felt the impact of the unexpected tax cuts announced in the mini budget created by the former Truss government, with the uncertainty resulting in dramatically increasing interest rates. With high inflation and increased borrowing costs, housing became more difficult to afford. After former chancellor Kwasi Kwarteng’s resignation, incoming chancellor Jeremy Hunt reversed most of the proposals in the mini budget. However, one proposal that remains and continues to generate mixed reactions is the permanent stamp duty cut. Some property lawyers indicate that this stamp duty cut will make buying first homes or moving more affordable. In the long term, they argue, this might rejuvenate the housing market.
However, with the applications for housing slowly getting back to normal, house prices are still high due to the demand. This is set to be worsened by the continuing market uncertainty, inflation, and unstable interest rates. Among those with a more skeptical outlook, property lawyers are bracing themselves for a crash in the market. If this crash transpires, fewer housing transactions would require some contingency plans.