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UK housing market: prices to drop further (but likely to avoid a crash)
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UK housing market: prices to drop further (but likely to avoid a crash)

Welcome to our #192 weekly newsletter.

“For women taking control of their financial future”

-Jana Hlistova


From The Purse


In this week’s newsletter, we focus on the UK housing market and why prices have only fallen 4% so far.

Lower demand should be driving down home prices. So what is going on?

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And you can review the news in brief so you stay on top of global financial, economic and investing trends.

I hope you enjoy this week’s newsletter.

Until next week,

Jana


UK housing market: prices to drop further (but likely to avoid a crash)

House prices have dropped by 4% so far, but they are likely to fall further.


The Royal Institution of Chartered Surveyors has said there is “a renewed deterioration in UK home sales”, as reported by The Guardian.

Would-be buyers of homes hit an eight-month low in June, and the estate agent Winkworth warned this week on profits because of a slump in activity.

According to Moneyfacts data, a typical two-year fixed deal has risen to 6.66% even though Barratt Developments has said that demand from existing homeowners remains resilient.

But why have UK house prices only fallen 4% so far?

  • We’re not yet in a recession.

  • However the downturn is not expected to be as deep as after the financial crisis 2008/9 or in the early 1990s.

  • Sharp rises of unemployment is not ‘on the cards’ this time.

  • Instead we have earnings growth ripping along at 7.3% in the three months to May compared with a year earlier.

Calculated by Nationwide last month, a 10% deposit on a typical first-time buyer home is equal to about 55% of gross annual income, down from the all-time highs of 59% of late 2022 but still marginally above 2007-08 levels.

However the cost-of-living crisis is making it close to impossible for most to save for a deposit. Therefore it is more than likely that house prices will fall even further (as less people will be able to afford to buy).

According to think tank Capital Economics, their forecast is that UK house prices will decline by 8% over the next 12 months, with the overall drop to 12% from the peak.

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