No Signs of a Housing Market Crash on the Horizon

According to the latest figures from Nationwide, house price growth may be slowly beginning to decelerate. But what has become clear is that the withdrawal of the government’s temporary stamp duty incentive has not led to the housing market crash many had predicted.

In fact, there are no signs of anything close to a cliff-edge situation on the horizon, nor are there likely to be any as we head into the New Year.

Analysts have been in no doubt that the meteoric monthly growth in house prices recorded throughout 2021 could not hold its momentum indefinitely. Average house prices are still hovering around all-time highs in most regions, and annual house price growth for September still came out at 10%.

This represented a slight decline from the 11% year-on-year growth recorded in August. Compared to the beginning of last year, average house prices across the UK are up around 13% overall.

A combination of pent-up demand being released on the market and the temporary Stamp Duty holiday fuelled explosive property price growth during the first few months of the year. The consensus therefore suggested a crash was inevitable as demand began to slow and the Stamp Duty holiday expired.

In reality, prospective buyers are still competing frantically for desirable properties in popular parts of the country. In addition, the gradual return to city centre living and working is having an impact on the prices of properties that were not particularly popular during the pandemic.

Low-interest rates and a lack of inventory

Another factor that continues to fuel the market’s consistent performance is the availability of exceptionally affordable mortgages.

Recent months have seen a slew of 95% LTV products return to the market for the first time since the beginning of the pandemic. With deposit requirements being one of the biggest obstacles for first-time buyers looking to get on the housing ladder, 95% of LTV mortgages have understandably proved popular, at least among those in a strong enough financial position to qualify for them.

The combination of low-interest rates and a lack of available inventory across much of the country is likely to continue driving competition among prospective buyers over the coming months. As there is already insufficient supply available to meet demand, competition for available properties is only likely to escalate as we move into the new year.

The governor of the Bank of England has stated clearly that interest rates will have to be increased at some point next year in order to curb inflation. But even then, available inventory will not be nearly sufficient to cope with demand.

The likelihood of anything close to a housing market crash or a sudden plummet in house prices is more or less zero.