While many expect a decline in real estate prices as a result of the increase in the cost of financing, we find that reality is moving in the opposite direction. This unexpected rise raises many questions about the driving factors behind it, its impact on various segments of society, and the prospects for the British real estate market in the future.
And it rose House prices in UK Last November, at the fastest annual pace since November 2022, according to the latest data from the real estate lending company Nationwide, which added to signs of resilience in the real estate sector despite the rise in borrowing costs, according to a report published by CNBC and viewed by Sky News Arabia. .
Annual prices increased by 3.7 percent in November, and by 1.2 percent on a monthly basis, so that the annual and monthly increases were greater than economists’ expectations, according to a poll conducted by Reuters.
Flexible activity in the housing market
“Housing market activity has remained relatively resilient in recent months, with the number of mortgage approvals approaching levels seen before the pandemic, despite the rising interest rate environment,” said Robert Gardner, chief economist at Nationwide.
Other measures of Britain’s housing market also showed gaining momentum, with Bank of England figures last week showing that lenders have approved the most mortgages for home purchases since August 2022.
Gardner expects the housing market to continue to strengthen in the coming months. He said: “If the economy continues to recover steadily, as we expect, the underlying pace of housing market activity is likely to continue to gradually strengthen as affordability constraints are eased through a combination of Modestly low interest rates and earnings outpacing home price growth.”
Interest movements
Last November, the Bank of England reduced interest rates by 25 basis points to the level of 4.75 percent, representing the second interest rate increase this year, after the British Central Bank began the easing cycle last August by reducing interest rates by 25 basis points for the first time since the beginning of the Corona pandemic in early 2020. , after raising them to their highest levels in 16 years with the aim of curbing inflation, while the bank, during its meeting last September, kept interest rates unchanged, at the level of 5 percent.
Monetary policymakers pointed to the continued decline in inflation influencing their decision, adding that further rate cuts can be expected if price growth remains stable. However, the bank said it expects inflation to rise slightly in 2025, to about 2.75 percent, before it declines. to its target of 2 percent, while Goldman Sachs said that “stronger growth prospects in 2025 are likely to reduce the urgency of successive interest rate cuts in the near term.”
The annual inflation rate in Britain rose last October, recording 2.3 percent, compared to 1.7 percent in September, driven by the increase in energy prices.
The chief economist at Nationwide stated that interest on mortgage loans fell below the peak it reached in the summer of 2023, and explained that the strong state of the labor market in light of the decline in unemployment, and the momentum of wage growth at a pace exceeding inflation, are all factors that helped the continued recovery of activity. Prices have increased in the housing market since the beginning of this year.
For its part, the Labor government headed by Keir Starmer, which took power last July, promised to reform the planning system to allow more construction, and also set mandatory targets to accelerate housing construction, although the shortage of housing supply is likely to remain a factor in raising prices. In the medium term.
A sudden acceleration in prices puts pressure on affordability
In an exclusive interview with the “Eqtisad Sky News Arabia” website, Ali Hamoudi, an economist specializing in British affairs, said: “House prices in the United Kingdom grew at the fastest rate in nearly two years last November, in a sudden acceleration despite almost record highs that are putting pressure on Affordability, as the annual growth rate rose to 3.7 percent, from 2.4 percent last October, according to figures from the largest building society in the United Kingdom.
The UK housing market is showing more signs of adapting to the new “status quo” when it comes to mortgage rates, according to Hamoudi, which is due to a combination of easing interest rates and increasing average wage growth, along with ever-improving inflation rates.
He believes that this situation demonstrates the sector’s resilience despite the major change at the political level, with the Labor Party assuming power last summer after 14 years of Conservative government rule, which brought with it a set of potential political and economic changes.
The British economist added: “So looking ahead to next year, with interest rates lower and affordability improving, the confidence of many buyers will increase and better mortgage offers may be offered by many banks compared to what they were seeing at the beginning of the year in order to Make their next home purchase a reality.
It is expected that the market will witness a continued rise in homes for sale and that serious buyers will come to the fore, even though the winter months have historically been a quieter time. It is also likely that many people across England and Northern Ireland will purchase a property before the stamp duty tax rises. “Which will start from April 2025.
Investors raise prices
In turn, Tariq Al-Rifai, CEO of the Crom Center for Strategic Studies in London, said in his speech to the “Eqtisad Sky News Arabia” website: “The prevailing belief that the main buyers of real estate in Britain are individuals and families aiming for housing does not reflect the full picture of the market.” .
Al-Rifai explained that many buyers in the real estate market are investors seeking to buy homes for investment purposes, such as renting them. Some of them own several properties, which contributes to supporting the high prices we are currently witnessing.
The CEO of the Crom Center for Strategic Studies added: The rise in house prices and interest rates pose a major challenge for individuals and families who want to buy homes. In return, investors are better able to bear these costs, especially in light of the booming rental market.”
He pointed out that “rents, which are constantly rising in parallel with house prices, provide an additional incentive for investors to buy real estate, regardless of the current high price levels in the market.”
