Posted: Thursday, 31 August 2023 @ 10:19
a recent press release, the Royal Institution of Chartered Surveyors (RICS) has
reported a significant decline in UK house prices, marking the most substantial
drop since the financial crisis of 2008. This alarming trend is a reflection of
the challenging lending environment and its cascading impact on the housing
market. The RICS survey for July unveils worrisome statistics that prompt us to
delve into the causes, consequences, and potential paths for recovery in the
Numbers Tell the Story
RICS survey, which gauges the balance between surveyors reporting price
increases and those reporting decreases, paints a grim picture for the housing
market. The figures plummeted to -53 in July, down from a revised -48 in June,
signalling a sharp decline in house prices. This unexpected drop also marks the
lowest reading since April 2009, a time etched in memory due to the global
financial crisis. The report suggests that this downturn is a result of the
ongoing constraints within the lending landscape, placing immense pressure on
report underlines the detrimental effects of a tighter lending environment on
housing activity. With stringent lending practices and higher interest rates,
potential homebuyers are hesitant to enter the market, waiting to see how the
situation evolves. The increased strain on affordability due to elevated rates
has prompted buyers to adopt a wait-and-watch approach, creating a slowdown in
property sales. The affordability challenge also has implications for landlords
seeking mortgages, as rental income struggles to align with the requisite
affordability criteria set by lenders.
Expectations and Adaptation
market expectations remain pessimistic, as indicated by the RICS report.
However, experts like Jeremy Leaf, a former RICS chairman and London estate
agent, suggest that while the market is indeed facing challenges, there are
signs of resilience. Leaf highlights a growing determination among buyers,
particularly first-time buyers burdened by rising rents. This newfound
determination is coupled with a cautious approach to avoid overpaying in a
market marked by uncertainty.
Aboody, Director of MT Finance, emphasizes the role of interest rates and
banks' flexibility in shaping the market's trajectory. As interest rates
potentially peak and affordability concerns persist, the next few months will
be crucial in understanding how the housing sector navigates these challenges.
Aboody also questions whether banks will re-evaluate their rental coverage
requirements to offer much-needed support to landlords.
RICS report's findings shed light on the pressing issues that the UK housing
market is currently facing. The significant decline in house prices,
reminiscent of the 2009 financial crisis, serves as a wake-up call for
stakeholders across the industry. The tight lending environment, affordability
concerns, and uncertainty surrounding interest rates collectively contribute to
the present state of affairs. However, amidst the challenges, there are signs
of resilience, determination among buyers, and innovative adaptations by
developers. As the housing market navigates through these complexities, the
coming months will be instrumental in shaping its future trajectory and
These kinds of pressures and
changes to the property market mean that our clients may need to review their
situation, potential moves or stays, and in some cases, their portfolios.
Change constantly prompts new ideas.
We at the IPW recommend our
clients regularly review their Estate Planning requirements to make sure they
are still relevant to their situation and intentions.