Will the UK housing market cause high borrowing costs?



While many expect real estate prices to fall as a result of rising financing costs, we see the reality moving in the opposite direction. This unexpected rise raises many questions about the driving factors behind it, its impact on different segments of society and the outlook for the UK property market going forward.

And she got up House prices in UK Last November, at the fastest annual pace since November 2022, according to the latest data from real estate lender Nationwide, adding to signs of resilience in the real estate sector despite rising borrowing costs, according to a report published by CNBC. and the video is from Sky News Arabia.

Annual prices rose by 3.7 percent in November, and by 1.2 percent on a monthly basis, so the annual and monthly increases were higher than economists’ expectations, a Reuters poll showed.

Flexible activity on the real estate market

“Housing market activity has remained relatively resilient in recent months, with mortgage approvals approaching pre-pandemic levels, despite rising interest rates,” said Robert Gardner, chief economist at Nationwide.

Other measures of Britain’s housing market have also gained momentum, with Bank of England data last week showing lenders approved the most home-buying mortgages since August 2022.

Gardner expects the housing market to continue to strengthen in the coming months. He said: “If the economy continues to recover, as we expect, the underlying pace of housing market activity is likely to continue to gradually strengthen as affordability constraints ease. a combination of modestly low interest rates and earnings that are outpacing house price growth.”

Movements of interest

Last November, the Bank of England cut interest rates by 25 basis points to 4.75 percent, the second rate hike this year, after the Bank of England began its easing cycle last August by cutting interest rates by 25 basis points for for the first time since the beginning of the corona pandemic in early 2020. year, after raising them to the highest level in the last 16 years with the aim of suppressing inflation, while the bank kept interest rates unchanged at the level of 5 percent at the meeting in September last year.

Monetary policy makers pointed to the continued decline in inflation as influencing their decision, adding that further rate cuts can be expected if price growth remains stable. to its 2 percent target, while Goldman Sachs said “a stronger outlook for growth in 2025 is likely to reduce the urgency of successive rate cuts in the near term.”

Britain’s annual inflation rate rose last October to 2.3 percent, compared with 1.7 percent in September, boosted by rising energy prices.

Nationwide’s chief economist stated that mortgage interest rates had fallen below the peak they reached in the summer of 2023 and explained that the strong state of the labor market in the light of falling unemployment, as well as the momentum of wage growth accelerating outpacing inflation, were all factors that contributed to the continued recovery of market activity real estate since the beginning of this year.

For its part, Keir Starmer’s Labor government, which took power last July, has promised to reform the planning system to allow more building, and has also set mandatory targets to speed up housing construction, although the housing shortage is likely to remain a factor in raising the prices of Na medium term.

The sharp acceleration in prices is putting pressure on affordability

In an exclusive interview with the Ektisad Sky News Arabia website, Ali Hammoudi, an economist specializing in British affairs, said: “UK house prices rose at their fastest pace in almost two years last November, with a sharp acceleration despite the near-record highs that are putting pressure on affordability, as the annual growth rate has increased to 3.7 percent, from 2.4 percent last October, according to the UK’s largest building society.

The UK housing market is showing more signs of adjusting to the new “status quo” when it comes to mortgage rates, according to Hammoudi, due to a combination of easing interest rates and increasing average wage growth, along with improving rate inflation.

He believes this situation shows the resilience of the sector despite major changes at the political level, when the Labor Party took power last summer after 14 years of Conservative government rule, which brought with it a number of potential political and economic changes.

The British economist added: “So looking ahead to next year, with lower interest rates and improving affordability, the confidence of many buyers will increase and many banks can offer better mortgage deals compared to what they saw at the start of the year.” to make their next home purchase a reality.

The market is expected to see a steady increase in the number of homes for sale and for serious buyers to come forward, although the winter months have historically been a quieter time, it is also likely that many people across England and Northern Ireland will buy a property before the tax increases ‘Which will start from April 2025.

Investors are raising prices

In turn, Tariq Al-Rifai, executive director of the Crom Center for Strategic Studies in London, said in a speech on the Ektisad Sky News Arabia website: “The prevailing belief that the main buyers of property in Britain are individuals and families does not reflect the aspiration for housing a complete picture of the market.”

Al-Rifai explained that many buyers in the real estate market are investors who want to buy houses for investment purposes, such as renting them out. Some of them own multiple properties, which contributes to supporting the high prices we are currently witnessing.

The executive director of the Crom Center for Strategic Studies added: Rising house prices and interest rates pose a major challenge for individuals and families looking to buy a home. In turn, investors are better able to bear these costs, especially in light of the growing rental market.”

He pointed out that “rents, which are constantly increasing along with house prices, give investors an additional incentive to buy real estate, regardless of the current high price levels on the market.”





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