(Bloomberg) -- Britain’s housing market is shaking off forecasts for a crash, with a slump in the number of properties changing hands preventing a sizable drop in prices.

Most Read from Bloomberg

WeWork Goes Bankrupt, Signs Pact With Creditors to Cut Debt Trump Testimony Called a ‘Broken Record’ by Judge: Trial Update Israel Latest: Netanyahu Sees a Role in Gaza Security After War Trump Shouts at Judge and Lawyers in Wild Day on Witness Stand Stocks Fluctuate After ‘Fast and Furious’ Rally: Markets Wrap

A standoff between buyers and sellers has dried up housing transactions but also limited any plunge in valuations, with few households forced into selling up.

Data from the mortgage lender Halifax on Tuesday showed the first month-on-month increase in prices in seven months. That added to evidence that the market is stabilizing after a dip many had expected to turn into a sizable correction. While analysts predicted a 10% drop in prices from the peak in summer 2022, the slide so far is only half of that level and well short of the most apocalyptic forecasts.

Halifax said a lack of houses for sale helped deliver the biggest monthly price gain since February. There’s other factors supporting the market. The Bank of England’s decision to halt its quickest series of interest-rate increases in over three decades eased upward pressure on mortgage rates, while low unemployment and lender forbearance headed off the risk of forced sales.

“The high cost of borrowing alone is not sufficient to trigger the leg down we predicted,” said Andrew Wishart, senior property economist at Capital Economics. He sees the data as “confirmation house prices have stopped falling” and expects little change in the next year.

The remarkable resilience of property prices is likely to be a double-edged sword for Prime Minister Rishi Sunak. While a steady market would spare Sunak from the embarrassment of a slump that would dent his popularity with older voters, who tend to own homes, stretched affordability is aggravating younger people, who are upset they’re stuck in an overheated rental market.



While buyers have dried up, so too have the number of properties up for sale.

Tom Bill, head of UK residential research at Knight Frank, said “thin trading” means monthly price movements should be handled with care. “House prices will continue to come under pressure, but we think they will bottom out in 2024. We expect a decline of 7% this year and 4% next year.”

Under Halifax’s measure, prices are now only 4% off their peak last year despite mortgage rates nearly tripling since the start of 2022. In real terms the price falls are much heavier, though this matters less for mortgage holders.

Halifax’s measure was just the latest to show a stabilization in the market and even a strengthening in prices.

Nationwide Building Society said its data for October showed the strongest monthly rise in more than a year. A survey by the Royal Institution of Chartered Surveyors pointed to new buyer inquiries and sales rebounding from recent lows. Persimmon Plc, one of Britain’s biggest housebuilders, said the average number of homes sold at its sites per week rose over the past five weeks compared to than a year ago, prompting it to raise its guidance for the year.

“While the near term is likely to remain challenging and we remain disciplined on costs, we continue to position the business for growth when the market recovers,” Persimmon Chief Executive Officer Dean Finch said in the statement.

Even before the latest data emerged, analysts noted the current slump is nothing like the crash in the early 1990s, when soaring interest rates along with a sharp recession and jump in unemployment prompted prices to fall several years in a row.

At the moment, unemployment at 4.2% remains just 0.7 percentage points above its near 50-year low. Also, lenders have treated those who fall into arrears generously, allowing them to move to interest-only loans or extend their mortgage term instead of forcing them to sell.

“A lack of forced sellers has allowed supply to contract in line with demand,” said Wishart. “While that has supported prices, it means mortgage lending and sales volumes will remain very weak.”

Mortgage rates have also cooled from their summer highs with the BOE holding rates steady at 5.25% for a second consecutive meeting last week. Markets now believe the next BOE move is more likely to be down than up.

With prices edging lower, some buyers that have money ready to deploy are sensing an opportunity.

“First-time buyers in particular are in a strong position and know that they hold a lot of bargaining power,” said Stephen Perkins, managing director at broker Yellow Brick Mortgages. “The stupendously high cost of renting is also encouraging them to buy even though mortgage rates are much higher than what they are.”

It all means that predictions of a 10% peak-to-trough fall in house prices may end up being wide of the mark.

“While prices are likely to drift further south in the coming months, they’re holding up impressively in the face of horrible pressure,” said Sarah Coles, head of personal finance at Hargreaves Lansdown. “The resilience of house prices is due to the fact that so many sellers have decided to stay away for now.”

Even as the property market swerves an immediate meltdown, some are sticking by their predictions of further pain ahead.

Bloomberg Economics economist Niraj Shah is keeping to his prediction of a 10% fall from last year’s peak, arguing that “crucially, demand remains weak.”

“Ultimately, we have had the fastest pace of monetary tightening in decades and about half the impact is yet to come through,” he said. “We expect the UK economy to tip into a shallow recession by the end of this year. More expensive mortgage costs will eat into households’ buying power and remain a significant headwind for house prices.”

--With assistance from Andrew Atkinson.

Most Read from Bloomberg Businessweek

Elon Musk’s Brain Implant Startup Is About to Start Cutting Top-Ranked MBA Programs Struggle to Reverse Declining Applications In Uruguay, a Tax Haven With Lots of Beaches and Little Crime Private Equity Courts a Growing Class of Mini-Millionaires Who’s Ready for a Trump-Biden Rematch? Anyone? Hello?

©2023 Bloomberg L.P.