The housing market is starting to cool as buyer confidence plummets

High prices and interest rate rises on the horizon are starting to put potential buyers off.

by Rachel Savage
Last Updated: 31 Jul 2014

The housing market definitely needed to cool off – ya know, drink an ice-cold drink in the shade while fanning itself. Prices shot up 10.5% across the UK in the year to May and everyone from Mark Carney to Vince Cable and the IMF piled in to try and talk them down.

Now it looks like property prices may finally have hit something of a wall. A record proportion of people think the next year is a good time to sell a house, according to the latest Halifax housing market confidence tracker. But the percentage of people who are confident about buying has plummeted, as increasing numbers get concerned about high prices and future interest rate rises, which suggests prices might begin to drop.

A record proportion of people think it’s a good time to sell: 57%, compared with 32% who said it was a bad time. The difference between the two of +25 is only just up from +24 in the first three months of this year, but still a steep climb from -6 in the third quarter of 2013.

Meanwhile, the percentage of people who think it’s a good time to buy dropped, with the difference between them and those who think it’s a bad time plunging 29 points to +5, the biggest fall since the survey started in 2011. Londoners and those in the south east were the most negative, unsurprising given the sharp price rises there, while Scots and north easterners were pretty positive on balance.

More people think rising prices are a barrier to buying – 35% compared with 20% a year ago, while rising interest rates were cited by 18%, a rise of 5% in the last 12 months. Recent data from Rightmove showed these worries starting to feed through into asking prices, which fell 0.8% this month.

The imbalance in views of buying and selling could feed through into a temporary over-supply of homes on the market and some welcome moderation in overheated price growth (although large falls are not what the economy needs). The irony, of course, is the UK has a chronic shortage of new homes, which is what is really needed to bring the housing market into a nice, steady equilibrium.

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