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What next for the Cambridge bubble? PROPERTY ANOTHER FISCALLY TURBULENT YEAR FOR THE UK – BUT HOW HAS IT AFFECTED THE LOCAL PROPERTY MARKET?
WORDS BY ALEX FICE
brunt of increased affordability pressures next year – when the bank base rate is expected to peak at 4.0%. There are, however, several factors that should insulate the market from the risk of a bigger downturn, Lucian continues. “Borrowers who haven’t locked into five-year fixed rates had their affordability heavily stress-tested until August last year. This, plus relatively modest unemployment expectations and signs that lenders are looking to work with existing borrowers to help them manage their household finances, should limit the amount of forced-sale stock hitting the market. “Looking longer term, the Bank of England’s relaxation of mortgage regulation over summer has substantially enhanced the prospect of a price recovery – but only as and when interest rates start to be reduced once inflationary pressures in the wider economy ease,” he adds. For those renting, the forecast is less encouraging, as rental value growth is expected to outpace earnings growth in the short term, due to a pronounced imbalance between supply and demand. Savills also predicts that – as borrowing costs continue rising – the housing market will diverge between the mortgage- dependent mainstream markets and the prime markets, which account for the top
or better or for worse, 2022 was certainly an interesting year for the property market in England. Despite worldwide energy shortages and soaring
inflation, the housing market remained remarkably strong throughout the first nine months of the year. However, come autumn, the demand dynamics had shifted. Unsurprisingly, the comings and goings of three prime ministers combined with one of the most dramatic fiscal policy U-turns in recent memory was enough to spook the markets – sending a perfect storm of economic uncertainty across the nation. Here in Cambridge, however, house prices remained resilient in spite of the cost-of-living crisis and interest rate rises, which Cheffins director Richard Freshwater puts down to the unique dynamics at play in the city’s market: “Demand is consistent from London commuters, professionals working in Cambridge or throughout the Silicon Fen and also those who move to the area for lifestyle reasons,” he says. “We have an affluent population, which upsizes and downsizes regularly, ensuring the property market continues to tick over steadily, while the influx of buyers from further afield since Covid-19 has helped underpin house price growth in the region.” BRACING FOR IMPACT? Despite these factors contributing to a robust local market, with the national picture as it is, property owners in Cambridge are steeling themselves for a downturn in 2023. According to Lucian Cook, head of residential research for Savills, it’s sensible to approach the months ahead with caution: “Affordability will still come under real pressure as the effect of higher interest rates feeds into buyers’ budgets,” he comments. “That, coupled with the significant cost-of-living pressures, means we expect to see prices fall by as much as 10% next year during a period of much-reduced housing market activity.” This is expected to be accompanied by a fall in housing transactions, as first-time buyers and buy-to-let investors bear the
SAFE AS HOUSES Ed Meyer of Savills Cambridge predicts the local market will remain fairly strong
66 JANUARY 2023 CAMBSEDITION.CO.UK
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