January 7th, 2022

Assetz Capital refutes Halifax prediction

Assetz Capital chief executive Stuart Law “fundamentally” disagrees with the Halifax House Price Index’s prediction of a slowdown in house price growth, and said that specialist financing for housebuilders is required to combat this.

The index has found that UK house prices rose in December for the sixth consecutive month, up 1.1 per cent.

Halifax managing director Russell Galley said the prospect that interest rates may rise further this year to tackle rising inflation and increasing pressures on household budgets suggests that house price growth will slow considerably.

Law (pictured) said that he disagrees with this prediction and expects to see continued house price growth of around eight to 10 per cent this year. He said he would be surprised to see the base rate go above one per cent or so as the Bank of England has to consider the post-pandemic recovery alongside its response to inflation.

Law said people will still want to move home and new regulation due to come into force around the environmental credentials of new builds, building safety and the quality of new homes is likely to support price growth.

“The general consensus seems to be that this growth will slow substantially as we move further into 2022 as a result of increasing interest rates, but I fundamentally disagree with the level of that slowdown that is expected and instead expect to see continued house price growth throughout the year in the region of eighth to 10 per cent,” Law said.

“There is going to be much speculation around rising interest rates this year especially given inflation and rising living costs, but I think we will see far less in terms of actual movement over the coming year than would be needed to slow house price inflation materially.

“I don’t, therefore, see minor interest rate increases outweighing the relatively low supply of new housing and also the exceptional demand we are still seeing from home-movers motivated by a strong desire to adapt their lifestyle to the reality of a post-pandemic world, and all that brings.”

Law said that support for housebuilders, particularly small- and medium-sized enterprises that are specifically impacted by rising build costs, is vital if the UK is to keep construction rates up, boost the supply of new homes and protect affordability.

He said “specialist finance is going to be essential this year for housebuilders to keep projects on track” in the face of a range of market and economic challenges and the government should implement planning reforms to quicken the process and lower the costs involved.

“We are not supportive of strong house price growth for affordability reasons, and these challenges need to be addressed, therefore,” Law said.