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Bank of England Warns House Prices Could Fall by 1.25%

Posted by Fojul Uddin on May 31, 2019
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It’s not just our potential exit (or not) from the EU that’s uncertain. No, the UK’s property prices are all over the place as well, it seems. From a predicted 0.2 per cent increase in February this year, the value of property in the UK this year is now expected to fall by 1.25 per cent.

The statement, from the Bank of England this month, blamed the fall on a number of factors – such as low buyer demand, but especially “Brexit-related uncertainty.” It was in reference to the bank’s latest Inflation Report, which followed on from the UKs failure to reach an agreement on Brexit with the EU in April.

However, the good news for existing property owners is that the Bank of England has kept its interest rate at 0.75 per cent, meaning there will be no sudden hike in mortgage payments for those struggling to pay off that monthly chunk of debt

Buy to let landlords suffering and selling up

Home owners in high price areas such as London and the South East have already seen the value of their property drop this year – and indeed pretty quickly post-2016 when the Referendum was held. But professional landlords have also been hit hard, regardless of where in the UK their property is located. That’s due to legislation introduced over the past few years coming into force, such as cuts in landlord mortgage interest rate relief and stamp duty on second homes (the latter having been in introduced three years ago now). Figures show clearly that an increasing number of buy to let landlords are selling up and leaving the property sector every year (and which is exactly what then-Chancellor of the Exchequer George Osborne wanted when he announced the new legislation in an effort to provide more housing to buy rather than rent).

New Builds affecting existing house prices

But it’s not only buy to let landlords that are providing more housing on the market for families and individuals to buy. Developers have been hard at it too, with 222,000 new houses added to the UK’s housing stock last record. It’s a large enough number to cause buyers to ask for price reductions in quite a few areas because supply is bigger than demand there – again leading to a fall in house price values.

Will house price depreciation spread northwards?

Sellers outside London and the South East are waiting with bated breath to see if the slump if the predicted fall in house prices is strong enough to drive values down outside the traditionally expensive regions. If it does though, some believe it could be the kickstart the sluggish property market has been looking for over the past few years. The result of a survey by the Centre for Economics and Business Research (CEBR) showed that property in both cities and major towns were taking an average of 102 days to sell – six days longer than the previous year.

What is promising though is that first-time buyers are still the most active segment of the property house purchasing segment this year. In one in ten of these cases it’s down to the success of government schemes Help to Buy schemes for New Build homes.

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