Sunshine and Real Estate: Exploring the Influence of Summer on the UK Housing Market
The UK housing market is a complex and ever-changing landscape that is influenced by a wide range of factors. One of the most significant of these factors is the season, particularly the summer season. The impact of summer on the UK housing market can be significant, with trends and predictions that can affect both buyers and sellers. In this blog post, we will explore the impact of summer on the UK housing market, including historical trends, current market conditions, and predictions for the future. We will also discuss the various factors that can affect the market during the summer season, such as interest rates, government policies, and economic conditions. By understanding the impact of summer on the UK housing market, readers can make informed decisions about buying or selling a home during this time of year.
Historical Trends
Historical trends show that the UK housing market tends to perform well during the summer season. Reports show that the summer months typically see an increase in home sales and prices due to a combination of factors, including warmer weather, longer days, and families wanting to move before the start of the school year. It is also noted that the summer season brings higher prices and faster sales to the housing market.
According to recent reports, the UK housing market has weakened in the first half of 2023 due to a number of factors, including the cost of living crisis, weaker real incomes, and the tightening of monetary policy via higher interest rates. House price growth has stalled as a result, with house prices falling for six consecutive months and a 1.1% annual drop in property values. However, despite the slowdown, house prices have risen 10.9% since March 2021 to a new average. The end of the era of record low interest rates and slower population growth are two other forces that are expected to shape the UK housing market and prices over the coming decades. The Bank of England has increased interest rates several times in recent meetings, and it is likely that further rises will occur in 2023, which could limit the amount that buyers can secure for their house purchase. While the market is falling, it is not coming down from the heights that some global markets climbed to, and the rebound in activity could be hit by rising mortgage rates.
Local market factors also play a significant role in the performance of the UK housing market during the summer season. According to Bankrate, factors such as the quality of the school district, proximity to public transportation, and local job market can all influence demand for homes and cause prices to rise or fall. Additionally, population growth and other factors can lead to larger increases in demand than supply, which can drive up prices.
Overall, the UK housing market has historically performed well during the summer season, but recent trends suggest that rising interest rates and economic conditions may have a negative impact on the market. Local market factors also play a significant role in the performance of the market during the summer season.
Analysing the Current State of the Housing Market
The UK housing market is showing signs of a slowdown, with house prices falling for the third month in a row, according to data from Halifax. The average house price fell by 2.6% year-on-year in June 2023, and the annual rate of house price growth dropped to 11.5% in August. This is due to rising interest rates, which have increased borrowing costs and reduced the amount of money that buyers can afford to spend on a home. The Bank of England reduced interest rates to 0.1% at the start of the pandemic, but they have since increased to combat inflation. According to The Guardian, the rises in the energy price cap in October and beyond are expected to increase pressure on household finances, which will also limit the amount that prospective house-buyers can afford to borrow.
Despite the recent slowdown, it is still too early to say whether the UK housing market is stable or not. According to Forbes, home prices have not yet dropped off substantially. However, the official house price index showed annual growth of 15.5% in July 2022, a 19-year high, but the comparison is artificially inflated. Sales were unusually low in July 2021, because the stamp duty holiday introduced to prop up the market during the pandemic came to an end on 30 June.
The summer season is likely to have an impact on the UK housing market, as it typically brings higher prices and faster sales. However, the current state of the market may affect this trend. Rising interest rates and economic conditions may continue to have a negative impact on the market during the summer season. Local market factors, such as the quality of the school district and proximity to public transportation, may also play a role in the performance of the market during the summer season. Overall, the UK housing market is showing signs of a slowdown, and it remains to be seen how the market will perform during the summer season.
Factors that could Affect the Market
Several factors could impact the UK housing market during the summer season. Interest rates are one of the most significant factors that could affect the market. According to Investopedia, low-interest rates tend to increase demand for property, driving up prices, while high-interest rates generally do the opposite. Rising interest rates could increase borrowing costs and reduce the amount of money that buyers can afford to spend on a home, which could lead to a slowdown in the market.
Government policies could also impact the UK housing market during the summer season. For example, the stamp duty holiday introduced during the pandemic to prop up the market came to an end on 30 June 2021. This led to a slowdown in the market, as sales were unusually low in July 2021. The government could introduce new policies that could impact the market during the summer season.
Economic conditions are another factor that could impact the UK housing market during the summer season. According to Bankrate, prices are driven by a wide variety of factors that are local, regional, national, and global. Population growth and other factors naturally lead to larger increases in demand than supply. Local market factors, such as the quality of the school district and proximity to public transportation, could also impact the market during the summer season.
Seasonality is another factor that could impact the UK housing market during the summer season. According to the National Association of Realtors, transactions and prices tend to be above-trend in the summer while activity typically slows down in the winter. Summer real estate markets are typically faster, more competitive, and higher-priced than cool winter markets. More homes are available each summer, and buyers will need to be prepared to spend a little more in the summer months.
Overall, the UK housing market could be impacted by various factors during the summer season, including interest rates, government policies, economic conditions, and seasonality. It remains to be seen how these factors will impact the market during the summer season.
Predictions for the future
The UK housing market is experiencing a slowdown, with falling house prices and a more cautious approach to lending. According to a poll by The Guardian, homeowners’ worries are affecting national mood, and there has been a small drop in prices. The consultancy Capital Economics is forecasting a 7% drop in house prices over the next two years, and demand is already falling sharply. The balance of new buyer inquiries in the survey by the Royal Institution of Chartered Surveyors fell to its lowest level since 2008 in August. UK house prices fell 0.9% between September and October 2022, the first decline in 15 months, according to data from Nationwide.
UK mortgage rates have been ticking upwards since spring, in line with rising interest rates, and this is causing financial pain for many homebuyers. According to CNN, UK mortgage rates are no longer below 1% or 2%, and as more buyers come up against the reality of monthly mortgage bills rising by hundreds of pounds, the financial pain will spread through the housing market.
Seasonality is another factor that could impact the UK housing market during the summer season. According to the National Association of Realtors, transactions and prices tend to be above-trend in the summer while activity typically slows down in the winter. Both sales activity and prices follow the same trend. The number of home sales increases significantly in the spring season. Sales continue moving upward in the following months, but at a slower pace. Demand and mobility are highest in the summer, as the data on existing home sales indicate. It seems that homebuyers tend to move in the summer, and especially for renters who buy, they are even more likely to move at that time.
Overall, the UK housing market is likely to experience a longer and deeper slowdown, with falling house prices and a more cautious approach to lending. Demand from buyers has fallen over the past 12 months, which has caused the housing market to cool off. The number of prospective buyers is down 30% from this time 12 months ago, and estate agent trade body Propertymark reported that in April, 74% of property transactions were completed below the original asking price.
To Summarise
In summary, seasonality plays an important role in the housing market, with transactions and prices tending to be above-trend in the summer while activity typically slows down in the winter. The summer season brings higher prices and faster sales to the housing market, making it a good time for sellers to capitalise on the market. However, the UK housing market is currently experiencing a slowdown, with falling house prices and a more cautious approach to lending.
If you are looking to buy or sell a home during the summer season, it is important to be prepared to move quickly during the fast-paced summer season. For mortgage advice, contact us at Status Mortgage Services.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
Approved by The Openwork Partnership on 28/06/2023
Status Mortgage Services is a trading style of Status Financial Services Limited which is an appointed representative of The Openwork Partnership, a trading style of Openwork Limited which his authorised and regulated by the Financial Conduct Authority.
