Will the housing market crash? Buyer hell continues as house prices reach £300k

House prices: Expert discusses 'interesting' pricing differences

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The UK housing market is now more expensive than it’s ever been, with few signs of slowing down despite predictions that it would earlier this year. The Rightmove House Price Index released on Monday announced the UK’s average house price has now reached £360,101, an unaffordable sum for many British buyers.

The continued rise in house prices sits against the backdrop of the worst cost of living crisis in a generation.

Prospective buyers have been forced to consider paying well over the odds for homes, or scrapping their search altogether.

Inflation is currently at seven percent and rising, and the huge increase in bills and costs has pushed many UK households into financial hardship.

The housing market has been insulated by a number of factors over the last two years: low borrowing rates, the Stamp Duty holiday, and a chronic shortage of new homes have all propped up prices.

Materials to build new homes have become scarce due to global supply chain issues – and increased demand leads to increased costs, all feeding into the nightmare scenario for buyers.

But now, the Bank of England is likely to continually raise the interest rate in increments until inflation drops to a desired level of two to three percent, adding even further to costs when buying a home.

While many prospective buyers and first timers are banking on a drop in prices later in the year, there has been speculation the market could drop significantly and cause a housing market crash.

Will there be a housing market crash in 2022?

David Hannah, Group Chairman at Cornerstone Tax, said: “I don’t predict a property market crash in 2022.

“The surge in demand, even with rising interest rates, has represented an adequate amount of liquidity, which is a good sign.

“The crash of 2008 happened because of a sudden loss of liquidity in the international banking market and we aren’t in that same situation again.”

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However, if the last two years have shown anything, it’s that unprecedented world events can cause financial chaos that may take years to recover from.

The current supply chain issues affecting the building of new homes could still get worse – China is now implementing hardcore coronavirus lockdowns, which are expected to affect supply chains around the world.

The war in Ukraine is also putting significant pressure on European economies, contributing even more to rising costs for consumers.

What’s more, the housing market has crashed before because of an interest rate hike, namely in the 1980s which caused a downturn into the 1990s, and again in the 2000s after the global financial crisis.

Mr Hannah is still hopeful, however. He continued: “We have had the pandemic, and substantial government spending because of it which has increased interest rates.

“But the question has got to be – will the global lending system be able to maintain the liquidity that it lost in 2008?

“And I think the answer is yes it will. We are certainly not going to see, as some people have predicted, 20, 30 or 50 percent falls in UK housing.”

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