Jonathan Cable

LONDON (Reuters – British property prices will continue to climb over the next few decades, but a cost of living crisis combined with rising mortgage rates will slow the rate of growth, according to a Reuters survey of experts in the housing market.

The Bank of England became the first central bank major to increase interest rates. It raised Bank Rate from its pandemic low of 0.10% to 1.0% in December. [ECILT/GB]

Asking what rate of interest would result in a slowdown in activity it was found that the median answer was 3.00%. But, according to a separate Reuters poll, this will not reach 1.75% next years.

A rise in the Bank Rate of 3% will likely cause a 5% fall in prices and a dip in transactions. Andrew Wishart from Capital Economics stated that an increase of Bank Rate to 2.5% will likely be enough to cause stagnation in prices and slow transactions.

Britons now face a crisis in their cost of living. The renewed COVID lockdowns in China, Russia and Ukraine caused disruptions to supply chains that had been just starting to recover from the pandemic. This has sent global inflation skyrocketing.

The April 54% rise in energy prices, which was predicted by the BoE to go up an additional 40% in October, is also causing them pain.

Yopa’s Mike Scott stated that “the post-pandemic spike in buyer activity has now begun to slow down in response to rising interest rate and costs of living. However, low stock levels means it still has sufficient momentum to continue at a slower pace into next year.”

The May 11-20 survey found that medians expected home prices to rise 6.5% in 2019, 2.9% in 2020, and 3.0% by 2024. According to a poll conducted in February, these forecasts were at 4.0% 3.0% 3.0% and 3.0% respectively.

It will still be below general inflation of 9.0%, which is the highest level in 40 years. It was predicted by the BoE earlier in this month that this could rise to more than 10% this year.

London is a popular destination for investors from abroad. The expected price rises in London were 5.0% this year and 3.1% 2023, respectively, as well as 4.0% next year. This was an increase on the 2.4%, 2.3%, and 3.8% forecasts in February.

Tony Williams from Building Value stated, “Due to greater international demand, particularly, London will outperform UK national markets in 2023, and 2024.”

According to Rightmove, the national average home price was $348,000974 in April. The average asking price for a new buyer was 220 466 pounds.

This level is prohibitive for those who want to climb the ladder of property ownership. Most mortgage lenders will require 10% deposits.

Asking nine people what the future would bring about in affordability for first-time buyers, they said it would get worse – two of them said it would become significantly more expensive – while only three answered that it would get better.

To make things more difficult for people who cannot afford to buy their first home, 89% of the respondents stated that affordability would decline in the next 2 years. Only 1 said it would increase.

Prices will rise and first time buyers will still struggle. Henry Pryor, a property market consultant said that some landlords are tired of the industry and have decided to leave it.

($1 = 0.8021 pounds)

(For more stories about the Reuters quarterly housing market polls, click here: