Exploring the UK Housing Market

Wahed Editor
September 16, 2022
Exploring the UK Housing Market

Buying a house is a milestone for some people and knowing when to take the plunge can be a difficult judgment call. Well, with UK property prices ramping up in the last ten years, this plunge has certainly become more expensive to take. The real estate market in the UK surpassed a historic high with average houses exceeding £350,000. However, the rising tide of inflation and higher interest rates is expected to have an impact on this property-high to some extent.

What’s happening in the market right now?

For starters, the pandemic and temporary stamp duty cuts led to a boom in the housing market in 2021. And currently, in the UK, house prices are up by 7.8% as of June 2022, down from 12.8% in May 2022. As per Land Registry data, the average price of a property in the UK increased to £286,397, that's a whopping £20,000 higher than previously recorded for this time of the year. This jump is driven by a shortage of supply of homes and an increase in its demand. Basically, there are fewer properties for sale and one too many buyers to buy! 

What about mortgage rates?

In order to beat rising inflation, the Bank of England raised interest rates to 1.75%. This is the sixth consecutive rate increase since December 2021 and it has already raised the cost of home loans significantly. How are these climbing interest rates affecting mortgages? Homeowners who are on variable mortgage rates (base rate tracker deals), which account for approximately 2 million home loans, feel the immediate rise in their monthly payments. Also, if you are about to leave a fixed-rate deal and are looking for a new one, you will most likely find it difficult to find one as good as your current one, so expect your monthly payments to rise.

Is it the best time to buy a house right now?  

Before making a decision, it’s worth considering your needs and financial constraints. However, the soaring cost of living is likely to have an impact on buyer affordability and market sentiment. As household budgets are tightening, fewer people can afford to stretch themselves to buy a home. Now on the flip side, if your family is growing or other similar considerations, you might be better off taking the plunge. Waiting for a dramatic drop in prices may be risky. Not to forget that property values generally rise over time, so a long-term investment could potentially yield a profit.

Are we expecting a crash?

A crash is promising too much, but prices could fall, as shown by recent data. While first-time buyers are hoping for a drop in house prices, there is plenty of uncertainty with that thought. There’s also the shortage of available houses which is making some homeowners delay their selling. In such a resilient property market, it is reasonable to expect that as borrowing costs rise, the number of buyers will fall. Similarly, if a recession occurs, the number of sellers may decrease as people become more risk-averse.  


This material has been distributed for informational and educational purposes only and the opinions expressed represent the views of the author and not necessarily those of Wahed Invest LLC or any of its affiliates, directors or personnel (“Wahed”).  Any assessment of the market environment as of the date of publication is subject to change without notice, and is not intended as investment, legal, accounting, or tax advice. Wahed assumes no obligation to provide notifications of changes in any factors that could affect the information provided. This information should not be relied upon by the reader as research or investment advice regarding any issuer or security in particular. Any strategies discussed are strictly for illustrative and educational purposes and should not be construed as a recommendation to purchase or sell, or an offer to sell or a solicitation of an offer to buy any security.

Furthermore, the information presented may not take into consideration commissions, tax implications, or other transactional costs, which may significantly affect the economic consequences of a given strategy or investment decision. This information is not intended as a recommendation to invest in any particular asset class or strategy or as a promise of future performance. There is no guarantee that any investment strategy will work under all market conditions or is suitable for all investors. Each investor should evaluate their ability to invest long term, especially during periods of downturn in the market. Investors should not substitute these materials for professional services and should seek advice from an independent advisor before acting on any information presented.

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