Demand Continues to Exceed Supply in Latest UK House Price Index

UK house prices increased by 13.6% in the year to August 2022, down from 16.0% in July 2022.

On a non-seasonally adjusted basis, average house prices in the UK increased by 0.9% between July and August 2022, down from an increase of 3.0% during the same period a year earlier (July and August 2021).

The UK Property Transactions Statistics showed that in August 2022, on a seasonally adjusted basis, the estimated number of transactions of residential properties with a value of £40,000 or greater was 104,980.

This is 7.6% higher than a year ago (August 2021).

Between July and August 2022, UK transactions increased by 1.1% on a seasonally adjusted basis.

House price growth was strongest in the South West where prices increased by 17.0% in the year to August 2022.

The lowest annual growth was in London, where prices increased by 8.3% in the year to August 2022.

England

In England, the August data shows on average, house prices have risen by 1% since July 2022. The annual price rise of 14.3% takes the average property value to £315,965.

The regional data for England indicates that:

the East Midlands experienced the greatest monthly rise with an increase of 2.3%
• the West Midlands saw the lowest monthly price growth, with a movement of -0.2%
• the South West experienced the greatest annual price rise, up by 17%
• London saw the lowest annual price growth, with a rise of 8.3%

Price change by region for England

Repossession sales by volume for England

The lowest number of repossession sales in May 2022 was in the South West.

The highest number of repossession sales in May 2022 was in the North East.

Average price by property type for England

Funding and buyer status for England

Building status for England

London

London shows, on average, house prices have risen by 0.9% since July 2022.

An annual price rise of 8.3% takes the average property value to £552,755.

Average price by property type for London

Funding and buyer status for London

Building status for London

Wales

Wales shows, on average, house prices have risen by 0.2% since July 2022.

An annual price rise of 14.6% takes the average property value to £220,059.

There were 5 repossession sales for Wales in August 2022.

Average price by property type for Wales

Funding and buyer status for Wales

Building status for Wales

Chris Druce, senior research analyst at Knight Frank, comments:

“The economy has covered a lot of mileage since August.

Even so, a 13.6% increase in annual house prices is indicative of the distortions caused by the stamp duty holiday, the main part of which ended in June 2021 and artificially depressed transactions volumes in the months after.

With inflation returning to a 40-year high of 10.1% today, it remains a question of how much the Bank of England raises interest rates by next week, not if.

With rates having accelerated further since the government’s mini-budget last month, current activity in the housing market is being shaped by mortgage status.

Those that can are pushing on and securing deals ahead of further increases, while others have paused plans to digest events.

With affordability set to be a growing barrier for many homebuyers in the coming months, we forecast house price growth will slow from here with price falls in 2023.”

Jeremy Leaf, north London estate agent and a former RICS residential chairman, comments:

“The slightly historic nature of these comprehensive figures demonstrates the strength in the housing market before it hit the buffers at the end of September.

Since then, activity has slowed and prices have softened a little but there is still plenty of pent-up demand, not least to take advantage of favourable existing mortgage rates before they rise even higher.

Fortunately most sellers are recognising the importance of negotiating bearing in mind rising inflation, which is making it particularly difficult for first-time buyers or those seeking larger loans.”

Paresh Raja, CEO of Market Financial Solutions, comments:

“Every house price index has taken on added intrigue of late.

Everyone – from buyers and sellers to brokers and lenders – is watching to see how the market reacts to rising interest rates, high inflation and the prevailing economic and political uncertainty that has defined the start to Liz Truss’ Premiership.

Throw in the stamp duty cuts, one of the few policies to survive from Kwasi Kwarteng’s ill-fated 38-day reign as Chancellor, and it makes predicting the direction of property prices very challenging.

For now, as the ONS data shows, the sense is that demand will likely dip – the result of rising rates more than anything – but limited supply will ensure enough competition in the market to keep prices stable, if not growing.

The stamp duty reductions, particularly for first-time buyers, should help keep the market buoyant; but unlike the stamp duty holiday of 2020/21, there is no deadline to this tax cut, so do not expect the same frenzied response of buyers rushing to benefit.

Certainty is a rare but highly sought-after commodity right now.

After several weeks of mortgages being pulled and some lenders no longer accepting new applications, borrowers and brokers are desperate to know what products they can access and at what price.

Lenders that can act quickly, transparently and commit to deals from the outset will emerge from this challenging period with their reputations enhanced.

And only with certainty and clarity from lenders can buyers act with confidence; so, the performance of lenders will be key to how the market performs in the months to come.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, comments:

“The uptick in inflation to 10.1 per cent will do nothing to calm borrower concerns about rising interest rates.

The reversal of many of the mini-Budget measures has stabilised base rate expectations although a 1 per cent increase is still expected at next month’s Monetary Policy Committee meeting.

However, the peak base forecasts of 6 per cent have now been lowered to around 5.25 per cent.

While mortgage rates are expected to settle at lower levels, particularly short-term fixes, the ‘big six’ lenders will be wary about reducing pricing too far too soon in order to manage volumes.

Even if these rates do edge downwards, there are still concerns about households coming off recent low fixes as borrowers will see a significant jump in monthly payments, just as the cost of living is soaring.”

Tomer Aboody, director of property lender MT Finance, comments:

“As demand continues to exceed supply, we have seen another month of rising property values with annual growth in excess of 10 per cent.

As the market now slowly takes a turn with constantly fluctuating mortgage rates, slower growth or possible downwards movement is expected.

However, this should be seen in perspective as even a 10 per cent fall in prices, which some are predicting, would take us back to where we were a year ago.

The new reality will be interesting once rates settle but further government intervention with regards to stamp duty and whether downsizers should pay would help maintain market momentum.”

Anna Clare Harper of real estate investment platform, IMMO, comments:

“House prices grew by 13.6% in the year to August, fuelled by shortage of supply and long-term growth in demand.

This data is the most reliable of all house price indices since it reflects the whole of the market from official government figures.

However, it’s also the slowest of the house price indices, and as we have seen, a lot can happen in a few short weeks.

As a result of what has happened since in terms of interest rates and confidence, going forward, the pace of house price growth is likely to slow.

This will be driven in particular by interest rate rises, affecting the circa two million property owners on, or soon to be on, variable or standard rates on their mortgages.

However, the largest tenure of housing in the UK is owner-occupied homes owned outright, meaning interest rate rises cause no pressure to sell.

That said, the cost-of-living crisis affects us all, and constrains purchasing power for homeowners and private investors alike.

There is much talk of a house price crash.

If the past is anything to go by, a correction in the pace of growth in the short to medium term is likely.

However, we still have a severe shortage of quality, energy-efficient housing – both for sale and for rent.

The fundamentals have not changed: we all still need a roof over our heads.

There is an opportunity for professional investors to step in and re-capitalise the market, upgrade the quality and energy performance of existing housing, and benefitting the people and their communities who still need a place to call home.”

CEO of Alliance Fund, Iain Crawford, commented:

“Despite the government’s best efforts, we are yet to see house prices take a hit and the property market remains predictably resilient despite the turbulence of the wider economic landscape.

However, although Jeremy Hunt has pulled an almost complete three sixty manoeuvre where tax cuts are concerned, the irresponsible management of the UK economy in recent weeks will understandably unsettle the nation’s homebuyers.

Many are already facing a notable hike to the monthly cost of their mortgage and while the increasing cost of borrowing is now likely to plateau, we can expect to see some form of house price correction.

That said, this will most probably come in the form of a reduction in the rate of growth rather than a downward spiral in values themselves.”

Director of Benham and Reeves, Marc von Grundherr, commented:

“If history has taught us anything, it’s that it will take far more than a bumbling bunch of buffoons mismanaging the economy from Westminster to topple the UK property market.

House prices continue to climb and this will remain the case as long as the buyer demand balance remains tipped firmly in favour of home sellers.

Mortgage rates also remain fairly favourable at present and so we simply won’t see a house price dip while this remains the case.

However, the increasing cost of borrowing may curb the enthusiasm of homebuyers when it comes to their ferocity during the negotiations stage and so sellers may no longer see their property achieve above and beyond their asking price expectations, as has largely been the case during the pandemic.”

James Forrester, Managing Director of Barrows and Forrester, commented:

“While the UK government may be a laughing stock, the UK property market is far from it and continues to move forward at pace despite the chaos that has unfolded across the wider economy.

A commitment to cutting stamp duty will certainly act as the cherry on the cake for many homebuyers, but it’s their continued ability to borrow in order to buy that will keep the cogs of the property market turning.

As it stands, they remain more than able, with the majority of lenders still offering a great level of products at what remain favourable rates.

With stability now returning to the gilt markets, we can expect the mortgage sector to level out after what has been a rough few weeks and this will ensure the market remains in good health over the coming months.”

Managing Director of HBB Solutions, Chris Hodgkinson, commented:

“It’s not just the nation that is facing a tough few months ahead with potential energy blackouts, we expect to see the property market follow suit as a shambolic government performance leaves its mark where house price growth is concerned.

While the market remains unfazed at present, it’s important to note that these figures are reported on a lag of a few months and there’s no doubt that the increasing cost of borrowing will have dampened buyer activity, which in turn will see house prices dip before the year is out.”