Wales’ house prices ‘on the edge of a precipice’ as looming recession set to end boom years
Wales’ house price boom is set to end as the cost of living crisis bites and the market is flooded with new properties, real estate consultants have said.
One real estate agency in Monmouth, Roscoe Rogers & Knight, warned that prices were “on the edge of a precipice” and “not sustainable” as the market saw a surge in new properties listed by customers eager to sell before any economic turn.
Consultants Knight Frank also warned that concerns over a recession may be about to correct what they called “a long-standing distortion” in the UK housing market.
They are predicting growth of 0% in Wales’ house prices next year, after a pandemic in which Wales’ house prices surged at a faster rate than any other part of the country.
In the 12 months up to the end of March house prices jumped by 11.7% to an average of £206,000 in Wales.
Knight Frank’s warning comes after the Centre for Economics & Business Research said that house prices in Wales would fall up to 4%, after seeing the highest growth in house prices during the pandemic due to a ‘race for space’ out of urban areas.
Knight Frank said that fears of an impending recession had led to sellers keen to get their houses on the market as soon as possible.
“It feels like we are at a crossroads,” said James Cleland, head of the Country business at Knight Frank.
“The number of buyers is still very high and now vendors are sensing that the market may be at its peak, hence taking offers and coming to the market. It is a sudden recognition that now is the time to act, brought on by all of the obvious factors coalescing at the same time.”
While house prices will rise 5% overall in Wales this year, next year will see 0% growth and Wales will not return to the high growth sen during the pandemic over the next five years. The highest growth will be 3% in 2026, they forecast.
Phil Smith, managing director of Roscoe Rogers & Knight, an estate agency in Monmouth, told the Times that the current prices were “not sustainable”.
“We have certainly seen an increase in instructions. I do think that we are on the edge of a precipice.
“We still have high demand but the telephone has definitely been quieter. There are still a lot of people sitting in rentals who haven’t found anything yet, that will hold prices up for a while.
“But we will see more than a slow deflation [in prices] later this year as people count the cost of living and run out of Covid savings.”
2023 will also see the Welsh Government take action, as part of a cooperation deal with Plaid Cymru, to try and reduce the number of holiday homes in Welsh communities.
They confirmed last week that they would carry on with plans for tax hikes on holiday lets that do not rent out their properties for more than half the year.
Following a consultation, from April local authorities will be able to set council tax premiums on second homes and long-term empty properties to 300% from April 2023.
The criteria for self-catering accommodation being liable for business rates instead of council tax will also change at the same time, from 70 to 182 days. This will stop second home owners from classifying homes as businesses because they are let out for one fifth of the year.
“As part of the Co-operation Agreement with Plaid Cymru, we are committed to taking immediate action to address the impact of second homes and unaffordable housing in communities across Wales, using the planning, property and taxation systems,” Economy Minister Rebecca Evans said.
“As we continue to progress the package of measures and drawing on the latest evidence base, we will keep under constant review the whole range of levers available to use and how they may be deployed most effectively to meet our policy objectives and avoid any unintended consequences.”
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