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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First things first: good. The greedy grasping b@stards driving up house prices will get their fingers (and hopefully a lot more) burnt. Time for the Senedd and the councils to put the boot in with extra council tax as well and we can rid ourselves of second homes. A couple of points from this article though: “…plans for tax hikes on holiday lets that do not rent out their properties for more than half the year.” And “The criteria for self-catering accommodation being liable for business rates instead of council tax will also change at the same time, from 70… Read more »
It has made it drastically smaller though. The holiday season in Wales doesn’t last for a whole six months, so those fancying a second home that they let out a couple of weeks of the year won’t be able to get away with not paying the new premiums.
I believe measures are also afoot to change the classification of short-term lets in Wales, so that might also impact the situation.
Real Estate Agents say prices are on a precipice. Hmmm now who do we know who has been encouraging the inflation of house prices and the mad panic of house buyers in the current market and for what reason? Maybe percentage based commissions are involved?
The real driver for the last 10 or more years has been access to cheap money. Mortgage rates at very low % rates did not lighten people’s burden unless they stayed put. People wanting buy for the first time, or relocate, or move into a bigger home were all keen to grab as big a loan as possible. The main outcome was the inflationary pressure on house prices broke into a gallop and we got to the silly stage where loans were several multiples of borrowers’ incomes. No one was any better off and more were now vulnerable to an… Read more »
The real drive on house prices has been and will always be greed and fear. Selling tools used by commission hungry estate agents. This ebbs and flows with the economic situation, but always driven by shiny suited estate agents
“Always will be”? Now is the time to stop moaning and poke the Senedd to buy up housing for our people.
So all the locals cashing in and selling to holiday let’s have had their time. Maybe they will invest their new found fortune and donate some money back to the community. Well probably not and easier to blame second home owners for everything rather look at some home truths
Told ya months ago, but now doormat “Wales” Gov. can step in and start buying em up. If they don’t, you’ll know that they have no interest in caring for the people of Cymru.