UK house prices increased by 1% in the period May to June 2022, according to the latest non-seasonally adjusted House Price Index (HPI) from HM Land Registry (HMLR).
While this is an indication that the market continues to stand firm amidst an economic backdrop of rampant inflation and uncertainty, it is a stark from the 5.7% growth seen in the same period a year earlier.
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.
The Royal Institution of Chartered Surveyors’ (RICS) June 2022 UK Residential Market Survey reported that results point to a softening in demand at the headline level, though they also found that prices continue to steadily rise.
Optimism came from the direction of Marc von Grundherr, Director of Benham and Reeves, who said:
“The UK economy is sailing head on into some very stormy seas at present, all while the captain remains on shore leave with no replacement yet to take the helm.
But despite this, the boat is yet to rock where the property market is concerned and the economic woes of rising inflation, increasing interest rates, and a cost of living crisis continue to bounce off the hull like mere pebbles rather than unforeseen ice bergs.
It’s inevitable that the property market was eventually going to slow from the high rate of knots it’s been moving at throughout the pandemic, but we’re yet to see any signs of it sinking and this is likely to remain the case.”
Andy Sommerville, Director at Search Acumen, was more cautious, describing the figures as heralding the “end of an era” insofar as rapid house price growth:
“While the ONS HPI results show another month of house price growth, we can see that this growth has slowed significantly, and, if we look at other HPIs, we should expect negative growth to be reflected in future iterations of the ONS data.
We are seeing the end of an era of consistent rapid house price growth and the start of a new chapter for the housing market characterised by economic instability. The data foreshadows what is likely to be a period where house price growth stalls or goes into decline as we are finally seeing rampant inflation and reactionary interest rate rises take the heat out of demand, which has been exponentially outstripping supply since the pandemic.”
“It’s normal to see prices dip around this time of year as people try and enjoy the summer holidays. However, the combined effect of the rising cost of living and base rate rises mean that many buyers are finding their affordability squeezed”, said Simon McCulloch, Chief Commercial & Growth Officer at Smoove, reiterating the slowdown in growth. He continued:
“Ultimately, there’s a clear divide between house prices, greater supply, and constrained affordability.
Gazundering – people reducing their offer to reflect house price valuation decrease – may also start weighing on the minds of sellers who are currently on the market. Against this backdrop, home moving remains a frustrating experience. It’s protracted, confusing and incredibly stressful, and both gazundering and gazumping play into this.”
Managing Director of House Buyer Bureau, Chris Hodgkinson, said that a period of recession is a matter of “when, not if”. He continued:
“While the property market has stood firm so far, we can expect a far greater level of uncertainty, coupled with hesitations on both the side of buyers and sellers, to cultivate a much less settled outlook over the coming months.
For those that do press on with a purchase, the ability to borrow will come at a greater cost and this will impact the price they are willing to pay, which in turn, will force sellers to lower their expectations when it comes to pricing their home for sale.”
