Has the housing market peaked?

According to recent figures the housing market in the UK may have peaked, as July’s figures show that the number of people looking to purchase their first home fell at the fastest rate in a period of three years.

Inquiries from first time buyers fell at the fastest pace since August 2004 according to the Royal Institute of Chartered Surveyors, with number of unsold properties rising to its highest in the past eight months, all of which points towards the housing market in the UK having peaked.

According to officials the reason for the slump in inquiries from first time buyers is due to the series of interest rate rises, and more importantly due to the added threat of further interest rate rises. The Bank of England has already hiked rates up five times by 0.25% each time since last August, and many predict a further interest rate rise of 0.25% in the coming months, which would take the base rate up to 6%. The interest rate is already at its highest in the past six years.

Officials state that many first time buyers are taking a ‘wait and see’ stance, and are continuing to rent for a while whilst they assess the market and see what happens with the interest rates in the coming months. However, although demand seems to have fallen according to these figures, house prices in the UK rose yet again for the 21st consecutive month.

An official from the Royal Institute of Chartered Surveyors stated: ‘The combination of softening demand and supply is causing market conditions to weaken further. Buyer activity has pulled back a little over fears that we may have seen the top of the market. With interest rates perched at 5.75% and a jump to 6% a strong possibility, aspiring first-time-buyers are continuing to rent until the market trend becomes clearer.’

Tom Smith
27th September 2007

Tags: surveyors, mortgage, prices, market, housing, home, cost