Will the tail-end of summer mean more pain for the UK housing market?
August, like much of the summer, has already proved a tricky month for the housing sector.
Despite all major central banks slashing their rates in the wake of cooling inflation, buyer confidence still appears to be low.
Last week’s Rightmove figures showed that the average price of a home fell by 1.9 per cent in August, the biggest dip for the month since 2018. During the tail end of the summer the cost of a home fell on average by £7,012 to £364,000.
So far this month, a number of house building firms also said they were suffering due to rising interest rates. Crest Nicholson said last week it expects adjusted profit before tax for the full year to be around £50m down from previous expectations of £73.7m, due to persistently high rates.
Next week, there are a few crucial updates. Here’s what to look out for:
August 30th: Zoopla HPI
Zoopla will publish its latest index on Wednesday with markets turning their focus to see what other estate agents take is on the ailing property market.
“What degree are higher interest rates, and thus mortgage costs, cooling the housing market, in turn dampening consumers’ confidence and their propensity and willingness to spend and, ultimately, gumming up two key drivers of economic growth,” analyst at AJ Bell said.
Slipping house prices has been the theme of the summer which can often be an indicator of poor economic health. This is because how much the price of a home will cost or the rate of a mortgage is often linked to interest rates, which impacts public spending.
August 30th: Mortgage Approvals
On the same day the Bank of England’s money and credit division will release its mortgage approval figures for July.
In June, Net mortgage approvals for house purchases saw an increase from 51,100 in May to 54,700.
However, following the central bank’s consecutive rate rises and mortgage rates reaching fresh highs during the month, it is not certain whether the upcoming figures will also show signs of growth.
Thursday 31 August: Grafton first-half results:
The company is one of Ireland’s biggest DIY, home and garden retailers via the Woodie’s chain and Leyland SDM and Selco in the UK markets.
Its results will tell whether or not customers have fallen out of favour with home improvements post-pandemic.
Grafton’s shares are trading some 40 near below their 2021 all-time high, when the DIY boom was in full throttle and the UK housing market was still drawing support from the stamp duty tax break and Help to Buy.
“Relatively new chief executive Eric Born, who took over from Gavin Slark last November, has not dished out a profit warning and trading updates in May and July have not prompted downgraded to consensus earnings forecasts,” the analysts added.
“Management is even running a third, £50m share buyback programme so it will be interesting to see if the first-half results statement is accompanied by any change in tone or outlook.”