Annual house price growth falls to 7.8% in June: UK HPI

Average UK house prices increased by 7.8% over the year to June, down from 12.8% in May, according to the latest UK House Price Index from the ONS and Land Registry.

Related topics:  Finance News
Rozi Jones
17th August 2022
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"Whilst demand continues to outweigh supply, signs such as this indicate that property prices are beginning to stabilise."

Despite UK house prices increasing between May and June, annual house price inflation has slowed due to the rises in prices seen in June 2021, which were the result of the stamp duty holiday.

On a seasonally adjusted basis, average house prices in the UK increased by 0.5% between May and June, following an increase of 0.8% in the previous month.

On a non-seasonally adjusted basis, average house prices in the UK grew by 1.0% between May and June, representing the eighth consecutive monthly increase. This compares with an increase of 5.7% during the same period a year earlier.

The average UK house price was £286,000 in June, which is £20,000 higher than this time last year.

Average house prices increased over the year by 7.3% in England, 8.6% in Wales, 11.6% in Scotland, and 9.6% in Northern Ireland.

The East of England was the region with the highest annual house price growth, with average prices increasing by 9.7% over the year, down from a growth rate of 14.5% in May.

The lowest annual house price growth was in the North East, where average prices increased by 3.6% over the year, down from 10.9% in May.

Ryan Joyce, director of Nottingham-based independent mortgage broker, Key Mortgages, said: "While the June annual growth rate has been skewed by the stamp duty holiday, it almost certainly reflects the general direction house prices will be headed given the extreme economic headwinds ahead. Though there's still demand for property, with first-time buyers particularly active, we could see a 5-10% fall in house prices over the course of the next year. The primary reason for the downward pressure on prices will be mortgage companies lending less due to the sharply rising cost of living and displaying broader caution amid the deteriorating economic climate. House prices will have to come down to meet those lower lending limits. It's as simple as that. I do not see the immense property crash happening that some are predicting as the jobs market is still fairly robust for now and supply is limited. But with inflation now in double digits, prices will almost certainly come down during the turbulent twelve months ahead. But as ever with the housing market, sooner or later values will start to rise again."

Clare Beardmore, head of broker and propositions at Legal & General Mortgage Club, commented: "While growth is gradually slowing, the housing market is thankfully proving more resilient than we might have hoped. The threat that a recession poses to house prices certainly shouldn’t be overlooked, but the imbalance between housing supply and demand and the UK’s longstanding commitment to homeownership are among the factors counterbalancing this, or at least for the time being. Over half a million people aged between 50 and 65 have also left the workforce since the pandemic began, stimulating further property sales.

“Although house price inflation will likely dip in the coming months, this should not alarm anyone. The desire to press ahead in the face of economic headwinds is matched by lenders, advisers, and borrowers.”

Conor Murphy, CEO and Founder of Smartr365, said: "Whilst demand continues to outweigh supply, signs such as this indicate that property prices are beginning to stabilise. Nevertheless, economic uncertainty remains at the forefront of the minds of buyers and owners alike. On the one hand, prospective buyers may choose to ride out this period of volatility before securing a property later down the line. On the other, the cost of living crisis may cause homeowners to re-evaluate their current mortgage rates and secure a more cost-efficient deal.

“Regardless, with uncertainty sweeping the UK housing market, intermediaries continue to have a unique role to play in mitigating the challenges faced by prospective homeowners. Increasingly, brokers are turning to technology to streamline and simplify the end-to-end mortgage journey, enabling clients to embark on a less stressful, more seamless home-buying process.”

Anna Clare Harper, director of real estate technology platform IMMO, added: "This slowdown in price growth will be welcomed by those struggling with affordability constraints, since the average house price remains over 10 times average annual individual earnings.

"It also makes sense. House prices and house price growth figures both reflect and affect consumer and investor confidence.

"House prices are the result of supply and demand. Interest rate rises and talk of recession are cooling demand. In recessionary times and when interest rates are higher, demand for buying properties tends to fall. However, we all still need a roof over our heads. Demand for housing does not fall. Demand shifts from buying to renting properties, which offers more flexibility.

"Unfortunately, the shortage of supply of both properties for ownership and for rent continues. For this reason, the slowdown in growth should not be taken as an indicator of a major crash to follow."

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