Is Britain headed for a housing market CRASH?

Martin Roberts discusses the rise in house prices

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A booming property market has graced Britain since the end of the first COVID-19 lockdown in 2020. Stamp Duty holidays, socio-economic factors and low-interest rates have resulted in a feverish desire for Brits to move home – but all good things must come to an end – and experts are on the fence about whether rising interest rates could cause the market to take a downturn.

House prices have reached a record high as a result of the boom, with the average property value reaching more than £250,000 for the first time in UK history this autumn.

Prices have increased by 9.9 percent in the past year and by more than £30,000 since the pandemic began – an unprecedented boom given the market was effectively shut down in the first lockdown.

And the market has reported on of its busiest ever year, too – Zoopla’s estimates show that there will be 1.5 million sales this year, with the total value of homes changing hands at £473 billion; some £95 billion higher than in 2020.

Predicting what will happen in the next year is tricky given the multiple factors at play in the market currently.

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The Stamp Duty holiday has now completely ended and coronavirus restrictions are no longer in place – but soon-to-be-realised rising interest rates could have an adverse effect on buying and selling.

Low mortgage rates have been underpinned by the lowest ever base rate of 0.1 percent set by the Bank of England prior to the first coronavirus lockdown.

The central bank declined to raise the rate last week, despite predictions it would rise to 0.25 percent initially, with further rises expected into the new year.

Even a one or two quarter point rise in the base rate, likely to come over Christmas, mortgage rates will still remain low compared to historical norms.

For example, in the early 2000s, the base rate averaged around 4.5 percent.

But some believe the rising rate will certainly dampen the market – and the changes in human behaviour, such as leaving cities and towns for the countryside, could be reversed in some cases due to offices reopening.

Doug Miller, Director at Lansdown Financial Services, told Express.co.uk: ”All the indicators are suggesting the UK housing market remains strong, and it is most certainly a sellers’ market at the moment as demand remains as strong as ever.

“The inevitable event of interest rates rising could dampen demand, with many buyers already stretching their budget to the max to simply be able to afford to get onto the housing ladder or purchase their next home as their family grows and requirements for more space increase.

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“Whilst inflation continues to soar, and many experts predicting the inevitable rate rise to come sooner rather than later, fortunately the continuing rate war between banks will keep interest rates low and thus the demand for housing should remain as strong as ever.”

The predictors for a market crash aren’t currently in place – but the rise in inflation, predicted by some to rise to as much as five percent, could start a chain of events that would cause the market to dip.

Lewis Shaw, Founder & Mortgage Expert at Shaw Financial Services, told Express.co.uk: “A crash is predicted by several factors coming together at the same time; rising inflation that leads to increased borrowing costs as central banks try to regulate the economy, over-inflated asset prices artificially pumped up by perhaps a tax break and low borrowing costs, rising unemployment and a contraction of the economy, brought on by supply chain issues, but mainly an inability to get credit.

“We can still get credit. So, as things stand, we’re OK.

“However, if you are concerned about the possibility of a housing crash, it’s maybe best to elect a Government that acts in its citizen’s interests rather than its internal failings.”

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