WIll house prices keep rising?

Manning Stainton

In the last few months, the news has been dominated by the cost-of-living crisis, the ongoing tragedy and war in Ukraine which continues without much of an end in sight and now we can throw into the mix a rise in interest rates. 

For many looking on, the sustained growth in the property market would seem against the run of what you might expect to see given all that is going on around us. How is it that the housing market appears to be defying all these headlines and continuing along the same path it has been since the emergence of the first lockdown in May 2020?

The answer isn’t necessarily a straightforward one but one which with a little economics can be explained.

Imagine your garden hose pipe for a moment and then imagine someone standing on that hose pipe trapping a build-up of water behind. This analogy reflects what happened through the first and other lockdowns, with the government turning on the money tap as high as it could go through quantitative easing, furlough and other spending. 

All of which driving money into the economy and into the hands of the population. And when the foot came off the hose pipe the rush began and even now nearly two years on, we are seeing that flow continue and this is what has created the boom in house prices adding around 20% to the majority of property values over that period. 

But how long will this property boom continue? 

There is now clear evidence to suggest that the flow of the hose pipe and money coming into the economy has returned to a more normal level and so in turn we can expect that the property market will do the same. 

As such, our expectation is that whilst prices might not fall in the near future, we will start to see the growth in property values return to a more normal level as we run through the summer and towards the end of the year.