The UK housing sector expects a downturn after rising interest rates

A wave of anxiety flared up in the UK housing market following the rise in interest rates, which immediately led to higher mortgage costs in the country as expectations renewed that house prices in Britain would face a downward wave that could continue for many years to come.

But a report published by the British newspaper “The Daily Telegraph” and seen by “Al Arabiya.net”He tried to reassure investors and property owners in the country, noting that” the same expectations had spread in early 2020 with the onset of the Corona virus and everyone was talking about the fact that the recession record it would lead to a market crash.

The report says, “The opposite has happened. Prices have risen due to new interest rate cuts combined with unprecedented support for jobs and closures that have forced residents working from home to reassess theirs. life condition”.

“Even crowded and seemingly unattractive London has managed to transform 3 years of price stability in a new growth spurt, “adds the report.

The latest official figures show that the average cost of a home in Britain was £ 277,000 last February, an increase of £ 27,000, or nearly 11% over the year, according to the “Daily Telegraph”, which said “this means that Typical property is profitable. as much as the average worker “.

This is “faster than the price growth in the months leading up to the financial crisis,” the newspaper noted.

However, the report indicates that the UK housing market has started to come under real pressure this time around, due to the fact that price inflation has prompted the Bank of England to raise interest rates from 0.1% of last December at the current 0.75%. However, policy makers are expected to raise interest rates to 1% next week.

And the “Daily Telegraph” says higher interest rates “mean an entire generation of borrowers will be exposed to an unprecedented rise in interest rates, and that’s happening at the same time. in which inflation is causing the greatest pressure on households’ real income from record started in 1956 “.

Andrew Wishart of Capital Economics expects the interest rate on new mortgages to rise from 1.6% at the beginning of questyear at 3.6% by the end of 2023.

There hasn’t been a sharp rise in interest rates of this amount since 1990, and when that happened in the early 1990s there was a painful collapse in the housing market, as prices fell for four consecutive years and they have started to recover effectively since 1996.

Real estate experts predict that prices will continue to rise in this moment before stabilizing at the end of the year and falling to 3% in 2023 and then 1.8% in 2024, according to reports by “The Daily Telegraph”.

“Some slowdown seems inevitable,” says Simon Robinson, chief economist at the Royal Institution of Chartered Surveyors.

“If you look back on major downward adjustments in the market, it has been associated with severe recessions, where there have been very sharp increases in unemployment and, as a result, property sales have faltered,” he adds.

He continued: “Right now even a recession that some people are starting to think will not be that big. Unemployment is still low, employment is still high and job vacancies are reaching new highs. It looks like we are at. this point is very far from the kind of scenario we have probably seen. ” in the early nineties “.

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