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US bank predicts rebound in UK property prices

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The leading US bank, Goldman Sachs, as reported by the Daily Telegraph, has told investors to stop betting against UK property stocks as the market is showing signs of recovery.

UK house price Statistics

If you take a look at the latest available UK House Price Index in September 2023, from the Office of National Statistics (ONS), they don’t look too rosy. But they are not dropping anywhere near as much as many experts predicted coming out of the Covid period.

These statistics were released in November 2023 and the next update will be available from ONS on 20 December 2023.

The average UK house prices decreased by 0.1% in the 12 months to September 2023 (these are provisional estimates), but slightly better than the 0.8% (revised estimate) for the 12 months to August 2023.

The average UK house price in September 2023 was £291,000, little changed over the previous 12 months but a little above the low point in March 2023.

In England house prices over the 12 months to September 2023 decreased to an average of £310,000 (losing 0.5%), in Wales the prices decreased to £215,000 (down 2.7%), but they increased in price in Scotland to £195,000 (up 2.5%). In Northern Ireland prices increased by 2.1% to £180,000 in the year to Quarter 3 (July to Sept) 2023.

The North East saw the highest annual percentage change of all English regions in the 12 months to September 2023 (up 1.6%), while the South West saw the lowest (down 1.6%).

As always with the latest statistics from the ONS, they are subject to revision. What makes the accuracy less certain is the fact they are based on low transaction volumes, considerably lower than historically. The ONS and the Land Registry work together to produce these statistics on house prices based on actual transaction completions.

The property portal’s view

According to Rightmove the average UK house price is expected to decline by 1% over the coming 12 months. The continuation of the fall in the inflation rate, the bank rate and therefore mortgage rates should provide some support to the housing market thinks Rightmove.

In a market that’s been on the slide there’s pressure on sellers to drop prices slightly below the competition to secure a buyer quickly, as affordability remains stretched, says the property leading property portal.

Tim Bannister, Rightmove’s director of property science has said:

“With mortgage rates more settled and on a slow downward trend, potential movers who have been biding their time and waiting for calmer market conditions may decide to act in the early part of next year.”

The bank’s view

Goldman Sachs has been urging investors to stop betting against UK property stocks as the market is now show signs of recovery, they think. Economists at the US Wall Street bank are now predicting a rebound in the UK property market as interest rates begin to ease.

Previously the advice coming from Goldman to their clients was that the UK commercial property real estate investments should be avoided as all the signs were that these property prices would spiral downwards, However, the bank appears to have revised its view of late and now believes that the worst could be over.

A spokesperson for Goldman Sacks, Sharon Bell of Goldman Sachs has said:

“The real estate market is holding up: housing prices edged up last month amid encouraging signs that mortgage rates are starting to come down.

“UK consumer confidence also rose sharply, outperforming expectations and raising hopes of higher spending on the festive season.”

Goldman is optimistic about UK interest rates coming down, its economists think that UK interest rates will fall to 3pc by mid-2025.

In a memo to investors last Sunday, Goldman said that Bank of England Governor Andrew Bailey is likely to announce a cut to interest rates.

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