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Eye-watering house prices might still get worse before they get better


3 min read

The housing market sometimes seems to throw off problems and confound sceptics with its resilience, like a bricks and mortar Donald Trump. Covid? Pah! Financial crisis? Bring it on! World economic meltdown? Sorry, did someone say something?

With interest rates climbing in a way that even the most pessimistic pundits didn’t seen coming, house price corrections are still a fraction of what might be expected. Yes, there are indications of a slowdown, even retraction in the latest year-on-year figures provided by the likes of Halifax and Nationwide, but there’s still no sign of the much-feared meltdown that some would almost seem to wish upon us.

So why is the housing market so resilient? To start with, supply and demand. A place to live isn’t a nice-to-have. It’s an essential. Whether renting or owning, putting a roof over the heads of ourselves and our family is a priority for most people. And we know that house building targets have consistently missed the mark despite cross-party promises – so the reality is we just don’t have enough homes for those needing them.

I drew a one metre by one metre square on the floor of a rundown flat in Knightsbridge...and then chalked '£19,000' in it

The culture in the United Kingdom is to own your own home. Head to the continent and they don’t give a soggy French baguette or flaccid German sausage about only ever renting. But here at home the appeal of generations of price growth and a tradition of having your own castle prevail.

I think you’d have to be fairly oblivious to the world around you not to realise that overall, property has proved to be a successful investment over the medium to long term. The price growth graph may have had a few dips and bumps along the way, but the average trend has remained consistently upwards since they started recording figures and the first person said, “Well of course, it can’t keep going up like this!”

Certain parts of the country have fared better than others, with London, alongside many other capital cities, out-pricing the rest of the UK by a significant margin. I drew a one metre by one metre square on the floor of a rundown flat in Knightsbridge we featured on Homes Under the Hammer recently and then chalked “£19,000” in it – the value of that tiny piece of floor. Eye-watering.

In general it is still cheaper to buy than rent, so if you can meet stringent mortgage-lending criteria, it’s financially worth making the leap. And as landlords are forced to increase rents to cover their own increasing overheads and reducing financial support, this divide can only deepen.

Now it’s worth caveating everything I’ve said with a few notes of caution. The truly horrifically quick and relentless rise in interest rates over the past year has still not bitten those on fixed rate mortgages, and the perfect storm of the cost of living and energy price hikes immediately following the rainy day savings battering that happened during Covid have created a lot of very vulnerable people who are teetering on extremely thin ice.

A harsh winter and further interest rate rises could well create a tsunami of pain.

But if it does all become too much for the bubble-wrapped housing market – and the corrections of 2007/08 and all those corrections before happen again – history will probably repeat in the same way it did then. And if the rhetorical question, “Do you wish you’d bought ten years ago?” is asked, the answer will be the same resounding “Hell Yeah!!”


Martin Roberts, property expert and presenter of Homes Under the Hammer

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