‘We’ve been inundated’: UK property market frenzy shows no sign of abating | housing market

It took less than a week to sell a two-bedroom garden flat in north London, with a guide price of £950,000. With a large patio, garden, oak floors and underfloor heating, it is in a mixed area on the outskirts of Islington and Camden.

“We were inundated with people wanting to see it,” says Andrew Groocock, regional partner at Knight Frank estate agency, which helped arrange 23 viewings. “It ticks the boxes of what exactly is hot in the market right now. It’s still an incredibly dynamic market. The last two years have been remarkable.

UK inflation hits 9% high in 40 years, cost of living crisis worsens as food and fuel bills soar while real wages fall and unemployment rates Interest in the UK is on the rise – but the housing market is still exuberant. House price growth may have peaked, but the “race to space” that began during the Covid pandemic continues. Many people have embraced hybrid working and are spending more time at home, increasing the demand for larger properties with gardens.

Andrew Perratt, the country manager of rival estate agent Savills, says suburban belts around major cities remain property hotspots – and the suburban area has been stretched because people who don’t have need to be in the office every day are ready to travel further.

Chart of average house prices in the UK

Estate agents say demand far outstrips supply, as many properties are bought within a week or two, while new sellers take longer to get their homes on the market. Agents are talking about bidding wars and potential buyers sending personal letters with photos of their children and pets to sell themselves to sellers, in a desperate effort to secure a purchase.

Lucy Joerin, joint chief executive of Oxfordshire-based Stowhill Estates, said large family homes that took six to nine months to sell before the pandemic are now selling within two to three weeks, with one being offered within four days after its launch.

“It’s not always the highest bid,” she says. “Many of our buyers prepare CVs, almost like a pitch for sellers… The main thing is that the families participate in the life of the village.” She says two successful buyers in recent days made a “lifestyle pitch” – sending letters about their families, with photos and promises that the children would go to local schools.

The housing market remains exuberant in cities like Oxford. Photograph: Robert Stainforth/Alamy

Jeremy Leaf, a North London estate agent, says that 30 years ago when he wanted to buy a particular flat, he also put personal notes on the door. “Why not?” he says. “Do whatever you can to get a property, especially when it’s so scarce and you want a particular road or catchment area.”

Several large family homes in Dulwich, an affluent area of ​​south London, on the market between £1.2m and £2m, have just been sold “well above” the guide price, according to Groocock.

Two of them sold out within a week – a three-bedroom house, priced at £1.5million, had 47 viewings and 23 offers, while a five-bed house, on the market for £2million, had 46 visits and 29 offers. Some go to sealed bids – where all bidders simultaneously submit bids to the agent without knowing what the rivals are willing to pay.

About 40% of properties marketed by Knight Frank in London are currently on offer, which is unusual. For the first time since the Covid pandemic hit, buyers from the Middle East are returning – with a number of bookings over the next two weeks to look at modern apartments in Kensington and Notting Hill.

The frenzy may be short-lived. With the cost of living crisis deepening and interest rates rising as the Bank of England struggles to get inflation under control, some fear the housing market could plummet, while d others think a crash can be avoided.

Labor market data this week showed “there are more jobs, more vacancies than unemployed, so that’s going to give confidence that people can meet their repayment obligations,” Leaf says. .

Graph of real estate prices and income

Tenants, facing a triple whammy of soaring rents, energy and food bills, will have a harder time. Monthly rents are 40% higher than 10 years ago, and tenants are feeling the full effect of rising costs, according to real estate website Rightmove, with charges rising at the fastest rate on record.

Those who were able to buy their own homes fared better. The Bank of England began raising its base rate in December, and it fell from the 0.1% level it had been at for three years to 1% this month, with further hikes expected, but mortgages are still cheap by historical standards, brokers say.

Leaf says the speed of the housing downturn will depend on how aggressively the Bank of England raises borrowing costs. “A correction is less likely this time as interest rates are lower, so debts are relatively more manageable, although of course it remains very difficult for some in the midst of a cost of living crisis.”

House price signs displayed in a realtor's window
Renters are struggling, but those who can buy their own homes are doing better. Photography: Yui Mok/PA

Jonathan Harris, managing director of mortgage brokerage Forensic Property Finance, said: “The market will likely top for a while. We will see steady interest rate hikes, not massive hikes.

With three quarters of borrowers on fixed rate mortgages, according to trade body UK Finance, many people’s monthly payments have yet to be affected. Those who want to buy are eager to repair, usually for five years, while there is also more interest in repairing mortgages for seven or 10 years, brokers say.

“Fixed rates have been the product of choice for some time now,” says David Hollingworth of L&C Mortgages. People can repair their mortgages for five or 10 years at a similar rate, at just under 2.5%. The situation is volatile, with lenders advertising and then pulling their rates every week.

But Leaf says the outlook is better than in 2008, when the market crashed and some properties lost 50% of their value. “Repayments, interest rates have been so low, and even those who are hurting, I hope they don’t get taken over and go into huge debt like some people have before” , he said. “It’s different from last time.”

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