But those with a mortgage offer made prior to the recent increase in mortgage interest rates will be keen to lock into it, supporting activity in the short term.
Divisions in buying power
More generally, as recent mortgage approval data shows, the market has become and will continue to be more weighted to equity rich and cash buyers. This will have an impact in all parts of the housing market, not just insulating the top-end from some of these pressures.
Some first-time buyers, essentially those are able to tap into the deepest coffers of bank of mum and dad, will look to take advantage of a less competitive market.
Their inclination to do so is likely to be fuelled by their experience of a private rented sector short on stock and high on rental growth.
Others will not have that option and face the prospect of spending longer in the private rented sector or, in some cases, moving back in with parents.
Turmoil in the private rented sector
And there will be divides in the private rented sector; both for landlords and tenants.
Recent increases in mortgage costs have substantially reduced the profitability of mortgaged buy-to-let investment, especially among those whose size of portfolio does not warrant using a corporate structure.
New investment is likely to become increasingly the domain of wealthier, larger landlords some of whom will look to pick up stock from those exiting the sector.
Not only are they better placed to weather the financial storm and cash in on strong rental growth, they are also less likely to be spooked by the rental reforms laid before parliament by Michael Gove or the need to bring their properties up to higher energy efficiency standards.
Together with the arrival of buy-to-let mortgages, the fixed-term assured shorthold tenancy has been fundamental to the growth in investment in residential property we have seen across swaths of middle-class Britain over the past 25 years.
Its demise will mean less flexibility for landlords, even though there will be strengthened powers to recover possession when rents are not paid or there is a genuine intention to sell.
These two powers ultimately protect the liquidity of landlords’ investments but will do little to encourage new investment.
This will undoubtedly lead to rental stock remaining in short supply.
So while existing tenants will benefit from much greater security of tenure, those looking to rent are likely to have less choice.
The million-dollar question
The million dollar question remains: what does this mean for house prices. Predicting this is, in reality, the devil’s own job.
Back in November 2022 our best estimate was that mainstream prices would fall by 10 per cent on average over the course of 2023.
In May, that was looking pessimistic, less so now, though the mitigating factors detailed above limit further downside risk.
