House prices are still rising at a rate of knots but some estate agents say the hints of a slowdown are already here.
Look at the figures and property inflation is rampant: this week, Nationwide said house prices were up 11 per cent in the year to July.
That’s even higher than the consumer prices inflation behind the cost-of-living crisis, for which the latest reading from the ONS came in at 9.4 per cent for June.
But while it may seem surprising that house prices are still climbing in the face of a dramatic escalation in mortgage costs – as interest rates are hiked to combat way above target inflation – there is talk that the market has already lost its head of steam.
Rocket man: House prices have soared in the pandemic boom reaching new high after new high, but some say the market is coming off the boil
Alongside the Nationwide figures came some comments from estate agents saying that the market had softened.
There was no doom and gloom, of course, merely talk of a gentle easing of pressure, but bear in mind that’s a reasonably bearish outlook from this traditionally bullish profession.
These views are just snapshots of opinion of what’s happening, but it’s worth keeping an eye on these in a market where measuring changes in direction is much harder than somewhere that it’s easy to track, such as the stock market.
And when it comes to the property market it’s not just the headline big house price report numbers you should look at, it’s also worth keeping an eye on what’s going on near you or where you’d like to buy.
This will provide a guide to the most relevant thing to you: be that a passive interest in whether your home has gone up or down in value, or an active interest in whether you can afford to buy a home or move.
While house price index reports make the headlines, they don’t provide the best pointer to what is happening.
The average UK home that they track is a construct and not a representation of something that really exists: the average property near me is different to one near you.
Meanwhile, the overall UK property market is made up of lots of different individual pockets that don’t always move together.
In a broad sense, this can be talked about as the North-South divide, London vs the rest, the commuter belt vs the regions, or in many other ways.
But in a narrower sense, you can get markets behaving differently in two places close together. As an example, the towns where I live in Hertfordshire often don’t take the same tack as nearby Luton.
Looking at where you live won’t give you the full picture of what’s going on in the property market across the UK, but it will give you a good idea of what’s happening where it matters to you.
Depending on how interested you are – and I’ll admit I am a bit of a property nerd here – you can keep an eye on asking prices, what places sell for, and how much or little is coming to the market.
But there’s another tip I’d give: if you really want to take the temperature of a local property market look at what isn’t selling.
Watching what sells and what doesn’t is the best guide to property sentiment and where the direction might be headed
This is something that us armchair property anecdotalists can do but house price indices can’t, as they are based on sale prices, asking prices, mortgage completion figures etc.
Yet, watching what sells and what doesn’t is the best guide to property sentiment and where the direction might be headed.
When you think ‘that’s a crazy price’ and stuff still sells, the market is going great guns.
When you see homes coming up for sale for more than the last batch and think ‘how much?’ and they still sell, the market is doing well.
But when you start to see only some of the better high-priced stuff selling and after that shift towards only what seems fairly priced for its attributes going under offer, you can see the heat coming out.
When the reduced labels start hitting Rightmove en-masse you know that stuff is definitely on the slide.
And you can tell a market’s in real trouble when homes start to seem good value and still don’t sell.
On that note, from my property watching near me, we’ve moved from the first and second scenario above towards the third.
The market is still in decent shape, but it’s come off the boil compared to the madness of the pandemic boom.
That’s to be expected: mortgage rates have leapt since the start of the year, with the average five-year fix climbing from 1.55 per cent to 3.5 per cent, potentially adding hundreds of pounds to the monthly cost of buying the same home.
Eventually, this will have an effect and you can check how much it would cost you with our best mortgage rates comparison calculator.
A hint of a slowdown showed up in the Nationwide report too, with the building society saying that while cash buyers remained strong, mortgaged buyers had slipped by more since the end of the stamp duty holiday.
I’d expect this trend to continue, as the rapid escalation of mortgage rates bites.
So, maybe it’s worth watching who isn’t buying as well as what’s not selling.