UK property market to focus on BoE actions, not words

17 May 2022

Property buyers and sellers in the UK should look more at the Bank of England’s actions rather than words, in terms of the housing market. Analysis out this week by Knight Frank shows the gloomy forecast and subsequent sentiment isn’t helping the country’s property market. And it may not be as severe as initially forecast.

What did the BoE say?

As well as an increase in the base rate last week to 1%, governor of the Bank of England, Andrew Bailey spoke of a “very sharp slowdown” and “hardship”, with inflation set to hit around 10% in Q4 this year. The cautious tone led Sterling to drop to a two-year low amid recession fears. Yet the Knight Frank findings reveal there doesn’t need to be a recession in order to negatively impact the UK housing market mood.


The Knight Frank analysis states: “Mere talk of a slowdown can leave people feeling jittery and some gloomy predictions from the Bank of England last week led to equally ominous headlines. Some buyers and sellers have understandably become more hesitant since the warning, although it doesn’t feel like a black cloud has suddenly descended over the market.” The findings also said: “We expect double-digit house price growth to slow to single digits by the end of the year as mortgage rates rise, the cost-of-living squeeze intensifies, and, perhaps most importantly, supply increases. However, our central case for house prices remains that a recession will not get thrown into the mix.”

Too dramatic?

In addition, analysts at Capital Economics said the Bank of England’s “dramatic cuts” to GDP will “prove to be too downbeat.” The EY Item Club also published its economic forecasts last week indicating growth in GDP in 2022 and 2023. As such, Knight Frank went on to add: “Such conflicting opinions don’t help buyers and sellers, but the assumption of a marked slowdown clearly comes with more caveats than some of the recent headlines would suggest. In summary, what the Bank does rather than what it says is perhaps worth watching more closely for now.”