House price growth slows to single digits as property...

Annual house price growth has dropped to its lowest level this year and is back to single digits, official data shows.

The Land Registry House Price Index for June shows average UK house prices increased by 7.8% in the year to June 2022, down from 12.8% in May 2022.

Monthly price growth was 1% in June, down from 1.2% in May, putting the average UK property value at £286,397.

House price growth was strongest in the East of England where prices increased by 9.7% in the year to June 2022.

The lowest annual growth was in North East, where prices increased by 3.6% in the year to June 2022.

Commentators suggest this is the latest sign of a softening in the property market.

Tom Bill, head of UK residential research at Knight Frank: “The distortions of the Stamp Duty holiday mean house price growth in June can largely be ignored.

“The bigger picture is that prices are waiting for gravity to arrive this autumn. Rising rates have driven demand as buyers attempt to move before mortgage offers expire but a more expensive lending environment will eventually see buyers’ budgets cut.

“Meanwhile, the recovery in supply that began in late spring has been put on hold as more people take a summer holiday for the first time in three years. As supply builds and demand softens, we expect price growth to end the year in single digits.”

Charlotte Nixon, mortgage expert at Quilter, suggested this is a sign of things to come considering the Bank of England base rate is now at 1.75% and as inflation has now passed 10%.

She said: “According to the UK HPI the average UK house price was £286,000 in June 2022, which is £20,000 higher than this time last year. Such a huge jump in a year will put buying a first home out of reach for many first-time buyers.

“However, the market may pull back now as cheap mortgage deals are a thing of the past along with a cost-of-living crisis draining people’s funds. With energy prices soaring we may see very few people choose to move in autumn and winter. If housing stock then starts to accumulate prices will be naturally driven down by the laws of supply and demand.”

Nick Leeming, chairman of Jackson-Stops, struck a slightly more positive tone.

He said: “On the same day that inflation has reached double figures, a slight sense of restraint is starting to creep into the property market.

“The impact of the higher cost of borrowing and less consumer spending power is likely to gradually filter through over the rest of the year.

“For now, an expected seasonal dip in activity over the summer months should remain front of mind before we declare a market adjustment. Committed buyers and those at the higher end of the market are remaining resolute in their bid to be moved in by Christmas, helping to maintain house prices far above the levels we would have expected to see prior to the pandemic.”

Leeming said the agency brand is continuing to see an active market at the top end, with cash buyers pushing forward with sales, unaffected by wider economic uncertainties.

He added: “Stand out properties in desirable locations and with state-of-the-art features will naturally still be in high demand. That being said, sellers should be realistic when deciding on a property’s asking price.

“Homes that are optimistically priced risk being overlooked in a market that has seen a number of delays in the buying process, with heightened activity levels causing a wider transaction backlog. The Autumnal months will provide the market with a clearer indication of how buyers will respond to an increasingly uncertain financial environment.

“Regardless, everyone is in agreement that a sudden drop in house prices is out of the question, with strong buyer demand, a healthy borrowing market and buoyant employment keeping the scales level, despite the wider economy contracting.

“There continues to be a lot of buyers and sellers to remain optimistic about, especially those committed to locking in more favourable mortgage deals before the next rate rise from the Bank of England. Sellers we speak to are keen to capitalise on what are overall still record house prices, which remain higher year-on-year at 7.8%.”

Nathan Emerson, chief executive of Propertymark, added: “The Latest data reports on the market in June, so it's not surprising that an increase is again being seen in the average house price.

“As of this month however, for the first time since the recent hikes in prices, data has shown that the average is starting to decrease.

“Despite this slowing in the market, agents continue to report increases in the time taken to exchange, with our latest housing market report showing that 41% of sales took 17 weeks or more to go through, compared to just 10% pre-pandemic.

"With interest rates rising, homebuyers, having secured a mortgage in principle at lower rates prior to even viewing any available properties, could well be starting to see them expire before exchanging. This could then have knock on effects on both fall throughs and affordability ratios."