PROPTECH-X ‘Proptech & Property News’: Homeowners could see £50k wiped off property value | Bank rate increased to 1.75%

Andrew Stanton’s daily proptech & property news in association with Estate Agent Networking

House Prices Could Drop by Nearly 20 Percent – Rishi Sunak’s Policies Will Be Key to What Happens Next

Property expert says some homeowners could see £50,000 wiped off value of their home next year

PRESS RELEASE: Property owners could see more than £50,000 wiped off the value of their home after Christmas, a leading housing expert has warned. 

The Lloyds Bank Group has forecast a potential 18% drop in property prices next year. 

Jonathan Rolande, the founder of property firm House Buy Fast, agrees that many regions could witness falls in that scale. 

He said: “An 18 per cent fall would knock £54,000 off the price of an average UK property that’s currently £300,000. Will it happen? It might. There’s no doubt we are in a bad place right now. We have rising variable interest rates, and we are still dealing with

 the disastrous repercussions from the mini-budget that have pushed up long-term borrowing costs, inflation, sky-high food and fuel. Economies worldwide are feeling similar pain. And on top of that property prices here are at an all-time high with plenty of scope to fall.

“This is a perfect storm of events, so it’s easy to see why the Bank is predicting a large drop. But it’s not yet a done deal. Prices are sure to wobble, but some regions may just tough it out.”

Explaining how some regions might escape a big drop, Mr Rolande, a spokesman for the National Association of Property Buyers, continued: “In many places, there’s a genuine shortage of property, and this won’t go away if prices fall. People need to live somewhere and they may need to rent, which will in turn push up sale prices as landlords feel secure buying an investment.

“Interest rates are still lower than in previous dips. Overseas investors are still keen to come here, more so given the weakness of the pound recently. The Bank of England looks set to increase rates again and ironically this could help settle the markets and make  borrowing a little cheaper, longer term.

Commenting on the importance of strong leadership from Number Ten, Mr Rolande added: “Rishi Sunak’s policies now are vital. They could, at least in the short to medium term, get things back on track. But more than ever we must assess the market on an almost weekly basis.

Lloyds are quite right to plan for the worst, but there are also reasons to hope for the best. The weeks as we approach Christmas are going to be crucial as to what 2023 will deliver in terms of house prices.”

Bank Rate increased to 1.75% – August 2022

The Bank of England’s Monetary Policy Committee (MPC) sets monetary policy to meet the 2% inflation target, and in a way that helps to sustain growth and employment. At its meeting ending on 3 August 2022, the MPC voted by a majority of 8-1 to increase Bank Rate by 0.5 percentage points, to 1.75%. One member preferred to increase Bank Rate by 0.25 percentage points, to 1.5%.

Inflationary pressures in the United Kingdom and the rest of Europe have intensified significantly since the May Monetary Policy Report and the MPC’s previous meeting. That largely reflects a near doubling in wholesale gas prices since May, owing to Russia’s restriction of gas supplies to Europe and the risk of further curbs. As this feeds through to retail energy prices, it will exacerbate the fall in real incomes for UK households and further increase UK CPI inflation in the near term. CPI inflation is expected to rise more than forecast in the May Report, from 9.4% in June to just over 13% in 2022 Q4, and to remain at very elevated levels throughout much of 2023, before falling to the 2% target two years ahead.

GDP growth in the United Kingdom is slowing. The latest rise in gas prices has led to another significant deterioration in the outlook for activity in the United Kingdom and the rest of Europe. The United Kingdom is now projected to enter recession from the fourth quarter of this year. Real household post-tax income is projected to fall sharply in 2022 and 2023, while consumption growth turns negative.

Domestic inflationary pressures are projected to remain strong over the first half of the forecast period. Firms generally report that they expect to increase their selling prices markedly, reflecting the sharp rises in their costs. The labour market has remained tight, with the unemployment rate at 3.8% in the three months to May and vacancies at historically high levels. As a result, and consistent with the latest Agents’ survey, underlying nominal wage growth is expected to be higher than in the May Report over the first half of the forecast period.

Inflationary pressures are nevertheless expected to dissipate over time. Global commodity prices are assumed to rise no further, and tradable goods price inflation is expected to fall back, the first signs of which may already be evident. Although the labour market may loosen only slowly in response to falling demand, unemployment is expected to rise from 2023. Domestic inflationary pressures are therefore expected to subside in the second half of the forecast period, as the increasing degree of economic slack and lower headline inflation reduce the pressure on wage growth. Monetary policy is also acting to ensure that longer-term inflation expectations are anchored at the 2% target.

Proptech and Property News in association with Estate Agent Networking.

Andrew Stanton is the founder and CEO of Proptech-PR, a consultancy for Founders of Proptechs looking to grow and exit, using his influence from decades of industry experience. Separately he is a consultant to some of the biggest names in global real estate, advising on sales and acquisitions, market positioning, and operations. He is also the founder and editor of Proptech-X Proptech & Property News, where his insights, connections and detailed analysis and commentary on proptech and real estate are second to none.

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