Houses prices are through the roof, a recession is about to hit, and experts are predicting that prices could fall over the next 12 months due to rising interest rates.

Sounds bad right?

So, should you wait to buy property, hope the market subsides or jump in now in case prices continue to rise?

This is one of the questions I get asked most.

Rising house prices

The housing market continues to grow, despite pressure on household costs, but data has shown a decrease in that growth.

Let me explain…

Rightmove reported average house prices of £365,173 in August, down 1.3% from July. Annual growth dropped from 9.3% to 8.4%.

A short supply of properties to the market and strong demand for them is continuing to keep house prices high, despite the slowdown in growth.

The reasons for the booming UK property market:

1. Demand – there aren’t enough houses available for people who want them
2. Low mortgage rates – historically, although that’s about to change!
3. Stamp duty holiday in 2021 - and a permanent increase in thresholds in September 2022
4. The desire to move from cities to rural living and working from home trend following covid

Could house prices crash in 2022?

Given the reasons above which continue to fuel the market, a crash is unlikely. But a fall isn’t out of the question, and here’s why:

• Interest rates continue to increase, making mortgages more expensive and putting off both home movers and investors from buying
• Rising costs of energy and goods, could cause people to sell their home. More supply = lower house prices
• Cost of living crisis and rising inflation means fewer people can save a deposit to buy
• House prices rose fast in 2021, a ‘correction’ could see them fall at the same rate
• The pandemic is still with us, and more restrictions are not out of the question

So, is now a bad time to invest in property then?

If you’re investing in property as part of a long-term strategy; 10 years or longer, it’s never a bad time to invest. You’re relying on the increase in value over time, which will be up, even if it dips during your ownership.

Most likely you’ll also be benefitting from a monthly income renting out your property, which will remain largely unchanged, whether the value of the property itself goes up or down.

If you’re investing to benefit from monthly cash flow, and you have tested your numbers with the increased interest rates, and you’re still happy with the return, then it’s not a bad time to buy property.

If you’re investing for capital growth opportunity further down the line, you might have to wait longer than you would have five years ago until the market dips, recovers and grows again, which typically takes 18 years.

If you’re doing flip projects or new builds to sell, just be aware that they might take longer to sell at the price you want, if the market makes a downturn. So you could be left with a choice of selling at a lower price or holding out longer to get the price you want.

The market works in cycles, and we can’t expect it to be on our side all the time. The good thing about cycles is, what goes around comes around again, and in some ways it is predictable over an 18-year period that the market will both rise and fall. This is no different in any other investment market; stocks, crypto etc.

Zoom out and look at the bigger picture of UK property prices, this is what you should focus on for long-term investment. And personally, I like what I see.