With interest rates rising, inflation hitting double figures and a recession on the cards, are we finally about to see a house price crash?
The UK’s house prices fell slightly by 0.1% in July compared with June. Following a year of exceptionally strong growth, house prices fell by 0.1% in July according to the Halifax Price Index.
The average UK house price slipped back in July from a record high the previous month, marking the first month-on-month dip since June last year.
The lender says that the average home price in July was £293,221 and they are warning that house prices could fall further after the Bank of England raised interest rates this week.
In their latest report, Halifax says that house prices are still £30,000 higher than they were in July 2021.
The managing director of Halifax, Russell Galley, said: “Following a year of exceptionally strong growth, UK house prices fell last month for the first time since June 2021, albeit marginally.
“While we shouldn’t read too much into any single month, especially as the fall is only fractional, a slowdown in annual house price growth has been expected for some time.”
‘Rising borrowing costs are adding to the squeeze’
He added: “Leading indicators of the housing market have recently shown a softening of activity, while rising borrowing costs are adding to the squeeze on household budgets against a backdrop of exceptionally high house price-to-income ratios.”
The last time the UK entered a prolonged recession in 2008, house prices crashed, leaving many homeowners in negative equity.
After the pandemic, there was a surge in demand for houses.
Halifax described this as a “race for space” where people who lived in the city moved to the countryside.
Will the housing market cash in 2022?
Tim Bannister, Rightmove’s Director of Property Science has predicted that there will be price falls in 2022.
He said: “After a very strong first half of the year, it is likely that the housing affordability crunch will have a greater impact on market behaviour in the months ahead, with further interest rate rises anticipated during that period.
“This, alongside more choice coming on to the market for buyers and the usual seasonal variations we would expect, means there are likely to be some month-on-month price falls during the second half of the year.”
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