The UK property market is collapsing

There’s the surreal and there’s the UK property market, which takes the surreal to a whole new level. Imagine Dali, on angel dust.

The Halifax house price index for February recorded monthly price growth of 0.5% and annual growth of 10.8%, the highest level since June 2007, just before the CDOs knock out the entire banking system and the global financial crisis sets in.

Average prices hit a new record high of £278,123, with supply being, according to Halifax chief executive Russell Galley, the main driver: “Lack of supply continues to support rising property prices, recent industry surveys showing a shortage of new properties listed, maintaining a long-term trend.

Looking ahead, Galley naturally struck a cautious note, noting that geopolitical events are exposing the UK to new sources of uncertainty: “The war in Ukraine is a human tragedy, but it is also likely to have effects on trust, trade and global supply chains. Soaring oil and gas prices are an immediate consequence, meaning UK inflation – already at a 30-year high – will stay higher for longer.

This, coupled with rising interest rates, Galley continued, “will add pressure to already strained household incomes. These factors are expected to weigh on buyer demand over the course of the year, with market activity likely returning to more normal levels and a slowdown in property price growth expected.

At least that’s the theory. The reality, according to Lewis Shaw, founder of the Mansfield-based independent mortgage broker, Shaw Financial Services, is that the UK property market is on a different continuum: “The UK property market has gone down the rabbit hole. In a difficult climate of rising interest rates, runaway inflation and impending National Insurance tax hikes, the real estate market is dancing to its own beat and prices are continuing to rise. Economic logic suggests prices should fall, but the surreal lack of inventory is keeping values ​​up.

Ross Boyd, founder of the still-active mortgage comparison platform,, also pointed to the dreamlike rises in supply house prices: “Lack of supply is less a long-term trend than a law of the UK property market. Likewise, demand is still rampant, despite economic fundamentals suggesting it shouldn’t be. The main challenges currently facing the market are an outrageous lack of inventory, rising interest rates, soaring cost of living and the tragic war in Ukraine. Against this backdrop, the market is expected to slow as we progress through the year. »

Andrew Montlake, managing director of the UK-wide mortgage broker, Coreco, agreed: “Interest rates would have to rise further to keep inflation under control, tax hikes are coming ever closer, and energy and grocery bills are skyrocketing. Going forward, people’s borrowing power is likely to decline as lenders factor in these additional costs, causing the market to cool.

Marcus Wright, MD of Real Estate Broker, Corporate finance in Bolton, also pointed to inflation and war in Ukraine as a major threat: “Overall, the outlook remains oddly positive amid the cost of living crisis, but if inflation continues on its upward trajectory, things may well change. Any escalation of the war in Ukraine could also impact the market.

Graham Cox, founder of the Bristol-based broker, Self-Employed Mortgage Hub, was significantly more bearish: “While this latest house price index suggests the show is going on, the reality is that, for the UK property market, the show may soon be over.” Jonathan Burridge at Hybrid Broker, we are money, also expects reality to kick in, and soon: “We have many ingredients in the pot for a major recession. There is a storm brewing.

Penny D. Jackson