Start of the slowdown? Land Registry records first dip in price growth in 2022

Agents have heralded the beginning of the house price slowdown.

The latest Land Registry House Price Index yesterday showed values increased by 9.8% annually in March 2022 to £278,436.

The rate of growth slowed from 11.3% in February 2022.

It is the first slowdown in growth since December 2021 when the annual rate fell to 9.5% from 9.6% a month before. 

Monthly growth also slowed from 1.6% in February to 0.3% in March.

Most parts of the UK were still experiencing double digit growth though.

House price growth was strongest in the east Midlands where prices increased by 12.4% in the year to March 2022. The lowest annual growth was in London, where prices increased by 4.8% in the year to March 2022.

At the country level, the largest annual house price growth in the year to March 2022 was recorded in Wales, where house prices increased by 11.7%.

Values in England were up 9.9% while Scotland saw house prices increase by 8.0% in the year to March 2022.

Northern Ireland posted growth of 10.4%.

The figures also showed the impact of the lack of stock, with the Land Registry estimating that transactions fell by 37% annually in January 2022.

It is the lack of stock and high levels of demand that agents and industry commentators say will sustain price growth, even if it slows.

Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “Although this is the most comprehensive of all the UK’s housing market surveys, it is a little historic. 

“Nevertheless the figures interestingly highlight the beginning of the change in the supply/demand balance.  

“Rising interest rates and inflation contributing to a drop in real incomes is resulting in a reduction in quantity, if not quality, of enquiries. 

“We don’t expect property prices to fall noticeably anytime soon while the huge shortage of stock in some price ranges and locations remains, particularly as so many are still on fixed-rate mortgages or do not need to arrange finance.”

Nick Leeming, Chairman at Jackson-Stops, added: “We may see the cooling effects come into play more in the coming months, but significantly, unlike other periods of high inflation, it is the sustained demand from home buyers that will continue to press house prices upwards in the short term in spite of macro-economic headwinds.

“Recent data from the Jackson-Stops network shows that the typical bounce seen at this time of year has an extra spring in its step, with over half of our UK branches not only seeing an increase in buyer demand in April, some by more than double, but also witnessing a boost in supply of homes on the market. 

“We would anticipate this momentum continuing for the next quarter, in which a period where demand is lower than supply remaining considerably far off. What our data will start to show is that our reactive market remains buoyant for those correctly priced properties.”

Andy Sommerville, director at conveyancing software provider Search Acumen, predicted that rising interest rates and inflation will take some of the heat out of the property market.

“This will bring an end to a period where record prices have been announced every month for some time. 

“If we do see any uptick in mortgage arrears, repossessions, or simply more sellers coming to the market, then it’s sensible to anticipate a levelling out in house prices. 

“Equity rich homeowners will remain largely immune but struggling families, first time buyers and those who need to remortgage, will sadly be disproportionately affected. The saving grace is that wages are also on the up, which may mitigate any looming decline in property values if house price to earnings ratio remains relatively stable.”

Sommerville added that transactions are taking longer to complete.

He said: “In February we saw homebuyers battle with 135-day delays, where the average time between instruction and completion jumped 48% since 2020. 

“The digitalisation of the industry as a whole will help the market respond to future peaks and troughs, ensuring our housing market remains robust in the long term.”