Early Indications Medway’s Housing Market Is Slowing… Will It Crash?

Hello Readers,

Over the past couple of weeks, I’ve been carefully gauging the local market and reached a conclusion from the viewings I have carried out on behalf of investors, conversations with sales agents and the latest house price data.

The Medway property market IS slowing down. Asking prices are starting to drop and the market is shifting to become more of a buyers’ market (for the time being) – however, not in quite as bad a way as perhaps if we did not have a new, arguably more competent, Prime Minister at the helm.

In terms of data, the latest house price statistics for October show that Medway house prices have officially are 2% up on 2021 (compared to 9.4% YoY in October 2021) however, when you compare to August, which was a whopping 14.3% up on 2021 you’ll see the magnitude of damage that I suspect was largely caused by the ‘fiscal statement’ in September!

When we break down house price growth by area, you will see how the average annual growth is even more stark (the 2% came from some rounding, meaning that house price growth is worse than the headline figure):

  • Rochester – 1% increase
  • Chatham – Prices similar to 2021
  • Gillingham – Prices similar to 2021

Ok, so things were not looking great in the run up to September, but the decline has accelerated in a dramatic way. I think it just adds to what we’re learning from the past few years of how you cannot predict what’s just around the corner.

You may recall that I wrote an article in March about whether the Medway market was due to ‘boom or bust’ and it’s interesting to look back on the predictions as the ‘bust’ seems to be starting to play out!

I will make a full comparison when the years’ worth of data is available but reflecting back on March where we were commenting on how the dramatic lack of supply and overwhelming level of demand was driving house prices up the reverse has seemingly now happened.

Remember that the housing market is one of supply and demand, so a lack of demand (due to affordability and other factors) will cause less heat on asking prices. However… as less people perhaps look to move a lack of demand could also lead to a lack of supply.

Last week’s article asked the question whether landlords face ruin in the economic climate (and probably some do), however the key question to consider is probably how bad will things get and for how long.

According to the Bank of England’s current forecast, interest rates are currently expected to hit around 5%. This is lower than predicted under the disaster of Liz Truss (the dotted green line below), however still very high and dramatically higher than the predicted peak in August (the dotted red line)!

The good news is that the economists predict that the peak is unlikely to last more than a few weeks or months before rates start to fall.

We’re all waiting with bated breath for Rishi’s financial statement on 17th November which should add more clarity, however in the wake of a more certain outlook mortgage lenders have started to reduce rates. For example, NatWest have just dropped rates by up to 0.6%, The Times has recently reported that mortgage rates are dropping at the fastest pace since the mini budget and the FT reported that mortgage rates have reached their peak in the wake of the mini budget.

The dark storm clouds have slowed and torrential rain turned to a lighter downpour, but the climate remains uncertain. I don’t think we will return to the madness of the past few years and expect that the next two years will see a spluttering back into life as the market starts to return to something resembling pre-COVID levels (but not without pain).

What’s my thoughts in the long run. I anticipate that we won’t return to the lows we experienced since the 2008 crisis and new monetary policy will lead to investors needing to refocus and strengthen their portfolio as higher mortgage rates (even when they even out) will remain for the foreseeable.

It’s going to be tough, but us property investors are a resourceful bunch and we will adapt, not just survive but thrive!

Hasan

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