According to the latest UK House Price Index from the Office for National Statistics, and Crowdproperty’s analysis, UK average house prices increased by 7.8% over the year to June 2022. Indeed, this led City AM to claim that UK house prices and rents have defied inflation – with private rental rates growing by an average of 3.2% over 12 months, peaking at 4.3% in the East Midlands – despite this figure being less than the 12.8% growth reported in May.
Earlier in the month, Halifax reported that the average house price had fallen slightly to £293,221 which signified the first decrease since June 2021.
A slowdown in annual house price growth has been expected for some time according to Russell Galley, Managing Director at Halifax, with house prices likely to come under more pressure over the course of this year due to the rising cost of borrowing and decreasing consumer spending power. This opinion is widely shared by many market commentators, with Nick Leeming, chairman of Jackson-Stops, adding that “the Autumnal months will provide the market with a clearer indication of how buyers will respond to an increasingly uncertain financial environment.” Rightmove has a slightly different outlook, claiming that the recent drop in house prices has more to do with seasonality than the economy: this first price fall of 1.3% is on a par with the average August drop over the past 10 years, combined with distracted sellers putting their moves on hold to enjoy holidays without travel restrictions and more focused sellers offering favourable pricing to attract buyers quickly, possibly with a view to moving before Christmas bearing in mind the current average of 136 days to complete a sale. Tim Bannister, Director of Property Science at Rightmove, comments that “a drop in asking prices is to be expected this month, as the market returns towards normal seasonal patterns after a frenzied two years… Sellers who want or need to move quickly at this time of year tend to price competitively in order to find a suitable buyer fast.”
According to Zoopla, three bedroom houses have been the most in-demand properties in the last three months accounting for 44% of all enquiries on the platform – a legacy of the ‘search for space’ boosted by the pandemic.
Rightmove also claims the imbalance will prevent major price falls this year: despite the 12% increase in new listings coming to market compared with the same period last year, this is 6% lower than in 2019 and the number of available homes for sale is also 39% lower than in 2019. Buyer demand this month is 4% lower than in 2021 – in theory providing buyers with more choice – however, the figures are still 20% higher than in 2019.
Despite the attention-grabbing headlines, current prices are still 10% below the 2007/2008 peak and the same as 2004 levels (adjusting for inflation). Key factors suggest that there’s unlikely to be a major market correction as historically these are related to steep rises in unemployment, which is at its lowest rate for 50 years alongside the number of job vacancies being close to record highs according to Nationwide. Households also have a far greater savings buffer today to mitigate transitory inflation, due in part to extra funds saved during the pandemic. Additionally, the impact of interest rate rises will also be slower as there is a far higher proportion of homeowners without mortgages – according to Zoopla, half of all homeowners have a mortgage and 90% of these are on fixed rate deals for up to 5 years.
Crowdproperty will be exhibiting the The Property Investor Show at Excel London 7/8 October 2022