House prices are teetering on the edge of a fall, while the cost of a mortgage in the UK is increasing. 

The most recent figures from the Halifax show property price increases are flatlining; April’s increase for the average property was a mere 0.1 per cent compared to the same time in 2022. And, with the rapid rise of inflation in comparison, it means prices are, in reality, much lower. 

Cost of New Builds up 3.5 per cent

Looking at individual sectors, the cost of a New Build has actually risen over the past 12 months, by 3.5 per cent. Another positive figure is for property in the West Midlands, which has seen a jump of 3.1 per cent. 

Yesterday’s rise in interest rates, by 0.25 per cent, bringing the figure to 4.5 per cent, is exacerbating the issue of falling property costs. That’s because higher interest rates make buying less palatable. At the same time re-mortgaging becomes far more expensive. 

This is evidenced by the recent RICS survey which showed estate agents have more properties on their books. The average estate agent had 36 homes in April, compared to 35 for the previous two months. The reason being less buyer demand.

Buyers looking for smaller homes 

A squeezing of household finances has also led to a trend in people looking for smaller homes (ie with one bedroom less than in the past). Energy efficient New Builds are also featuring highly on buyers’ ‘want lists.’ 

Simon Rubinsohn, RICS chief economist, said: “Buyer demand still appears to be subdued in the face of relatively high borrowing costs… and ongoing affordability challenges.”

Although Tom Bill, head of UK residential research at Knight Frank, said he expected prices to fall this year, it wouldn’t be by much. He quoted a figure of around three per cent, saying the market would be buoyed by plenty of employment, large amounts of housing equity and people still sitting on impressive savings they garnered during lockdown.

Stammer to hit foreign buyers 

Labour’s Keir Stammer meanwhile threw a spanner into the works of property buying strategies of overseas buyers, this week. He announced that were his party to gain control of government he would impose new restrictions on foreign investors. This includes raising foreign buyer Stamp Duty yet again (it’s currently at two per cent) and curbing the number of properties they can buy on a development. 

Stammer says he also wants to give priority to first-time buyers. He would achieve this, he said, by allowing them a ‘buyers window’ for up to six months (or a time agreed by individual local authorities). In other words, only first-time buyers would be allowed to purchase for a set time. 

Rishi Sunak has already been criticised by some of his party for dropping national house-building targets – especially in light of the poor Conservative election results last week.

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