The UK’s cost of living crisis is expected to stunt house price growth for the rest of the year, according to estate agents Savills, taming property costs which continue to hit record levels.
Affordability pressures will leave house prices no choice but to slow in their ascent, as property deals and mortgage approvals fall in both March and April.
House prices are forecast to rise 7.5 per cent this year, Savills estimated, having previously expected growth of 3.5 per cent. Though Savills anticipates costs to fall ‘modestly’ next year.
The London-headquartered estate agents added that growth would likely improve if the Bank of England follows through on proposals to remove current stress testing.
“A lack of supply and strong buyer demand fuelled by the experience of the pandemic has turbocharged house price growth over the past two years, despite growing economic headwinds,” head of residential research at Savills, Lucian Cook, said.
“This, combined with the rising cost of that borrowing and cost of living pressures, leaves less capacity for further price growth, especially within markets where borrowing is high relative to incomes.”
While Savills expects “modest price falls”, Cook explained that the estate agent sees “nothing that points to a price correction”, which would see properties lose their pandemic gains.
The Halifax House Price Index revealed earlier this month that house prices have jumped more than £47,500 since the beginning of the pandemic.
“Affordability will be squeezed at the point of purchase, but interest rates are forecasts to remain low within an historical context and strong employment levels should serve to protect existing homeowners,” he added.
“The removal or relaxation of the stress test could improve the outlook for prices. However, additional capacity for growth would be dependent on the precise terms of reform and how far lenders are prepared to push loan to income multiples in a higher interest rate environment.”