Why mainstream house prices are set to fall by 10 per cent next year - Ben Staniforth

The data came just before the US midterm elections, as job growth remains robust in the face of rising inflation and interest rates.

The recent data showed an addition of 261,000 new jobs to the market, greater than Fed expectations, boosted by job growth within education/health services and leisure/hospitality, as retail sales growth remains in positive territory and businesses struggle to hire staff.

However, not all within the labour market seems to be positive; recent employment figures have shown an increase in unemployment levels across the US from 3.5 per cent to 3.7 per cent, moving the total above pre-pandemic levels.

This creates a real headache for the Fed, which is aiming to bring down inflation and will be hoping that the interest rate increases since the start of the year will start to put out the fire of the red-hot jobs market.

Month-on-month house prices across the UK fell 0.9 per cent in October following the market’s negative reaction to Liz Truss’ mini-budget, making it the first monthly decline in value in 15 months. Following the announcement of former-Chancellor Kwasi Kwarteng and Truss’ plans to implement billions of pounds worth of tax cuts, funded by borrowing, financial markets reacted violently, causing bond yields to rally higher while lenders pulled cheaper deals overnight due to rising uncertainty around borrowing costs.

With the erratic movement of bond markets, mortgage providers struggled to effectively price their products, pulling deals and scrambling to raise the rates on deals, but valuations across the housing market are expected to fall further over the coming year, partly because of changing political leadership, rising interest rates and a rapidly shifting global economic backdrop.

As a result, Savills are expecting mainstream house prices to fall by 10 per cent next year before improving in 2024 - bad news for homeowners and, with mortgage rates rising so quickly, perhaps neither good nor bad for aspiring homeowners too.

Plans to build the Northern Powerhouse Rail (NPR), a northern high-speed line linking London to the North of England, has been revoked only weeks after Truss’ cabinet gave the project the green light. The major rail scheme, which planned on adding a station to Bradford’s interchange has, under the new government, been scrapped upon a capital spending review.

The plan to build the NPR was strongly backed by Truss, local politicians and businesses in the hope that it would increase business flows and growth within the North of England.

However, Mark Harper, the new transport secretary, moved away from the idea as he referred to Truss’ plans for the NPR as a “mistake”, but hinted he is weighing up a cheaper alternative to get high speed rail between Leeds and London.

Henri Murison, Chief Executive of the Northern Powerhouse Partnership lobby group, expressed his frustrations around the “levelling up” of the north, adding “It raises serious questions about their plans for growth”.

Please note that this communication is for information only and does not constitute a recommendation to buy or sell the shares of the investments mentioned. The value of investments and any income derived from them may go down as well as up and you could get

back less than you invested.

Ben Staniforth, is a Research Analyst, Redmayne Bentley