"Today’s data is further evidence of a turning tide for house prices, reflecting the same pattern of declining growth we have started to see emerge over the last two months"
Average UK house prices increased by 9.5% over the year to September 2022, down from 13.1% in August 2022, according to the latest UK House Price Index from the ONS and Land Registry.
The annual percentage change slowed because UK house prices rose sharply in September 2021, during changes to stamp duty.
UK house prices remained unchanged between August and September, which also caused the annual percentage change to slow.
The average UK house price was £295,000 in September, which is £26,000 higher than this time last year, and unchanged since August.
Average house prices increased over the year by 9.6% in England, 12.9% in Wales, 7.3% in Scotland, and 10.7% in Northern Ireland.
The South West was the region with the highest annual house price inflation, with average prices increasing by 11.9%, down from an annual percentage change of 16.8% in August.
The North East has replaced London as the region with the lowest annual percentage change. Average prices for the North East increased by 5.8% over the year to September, down from 13.5% in August. The base effect has reduced annual percentage change in the North East, since average house prices rose sharply in the North East in September 2021 during changes to stamp duty. In contrast, house prices did not rise sharply in London last year, so its annual percentage change was not affected to the same extent.
Conor Murphy, CEO of Smartr365, commented: “Despite recent headlines, buyers, sellers, advisers, and lenders all remain committed to pressing ahead with sales. This steady demand is supported by falling swap rates and average interest rates. Some two and five-year fixed rates are priced between 4 and 5%, down from the 6%+ seen in recent weeks.
“The hope is that tomorrow’s Budget also brings clarity and stability to the wider economy, in turn supporting the housing sector. First-time buyer demand has already been recently supercharged by the Stamp Duty Land Tax cuts confirmed last month, whether it gets a further boost tomorrow remains to be seen.
“What is certain though is the need to digitise and streamline the homebuying process, reducing admin, time, and stress for all parties. If brokers haven’t already integrated tech tools into their everyday work, they are a step behind competitors. There is no need to rely on photocopied ID or paper fact finds in 2022.”
Andy Sommerville, director at Search Acumen, said: “Today’s data is further evidence of a turning tide for house prices, reflecting the same pattern of declining growth we have started to see emerge over the last two months. As the impacts of previous rate rises and inflation filter through into house prices over coming months, we’d expect to see further declines coming down the tracks.
“Homeowners will naturally be concerned about what this means for them but can take comfort from the government’s return to more traditional economic approach, which is likely to continue to stabilise the mortgage markets. The Bank of England indicated last week that a continued rapid ratcheting up of the base rate in 2023 would be unlikely, so this suggests that fears around runaway mortgage rates creating a demand cliff edge will not now come to pass, protecting homeowners from more severe declines in asset values.
“While demand will likely decline further as we enter a period defined by a painful combination of recession and high inflation, pressure on existing property transactions will only increase. If a forecast peak-to-trough 8% dip in prices becomes a reality over the coming year, lenders and selling agents will be under pressure to push sales through quickly or risk down valuations, renegotiations and fall throughs.
“This is happening at the same time as we anticipate significant spending cuts to already over-stretched government departments. In the housing market, this could mean further delays in processing property transactions which are already massively backlogged, making the stakes much higher and increasing transaction costs at a time when people can least afford it, especially sellers who might already be taking a hit on their valuation.
“Given these pressures, how the market fares in the months ahead will be defined by how well it learns the lessons of the pandemic and continues to invest in innovation as a tool for efficiency and cost saving in challenging times. We already have technology to digitise property data and automate the transaction process through AI, taking tasks that took weeks and cost thousands of pounds, and delivering them in seconds for half the price. As Britain’s recession becomes reality, now more than ever the property sector needs to embrace technology to future-proof businesses, keep markets moving, and support everyday buyers and sellers facing significant financial pressures.”
Paul McGerrigan, CEO at national broker Loan.co.uk, added: “The property market has seen phenomenal growth this year, with average UK house prices rising considerably from just under £274,000 in January to £295,000 in September.
“September’s monthly house price increase demonstrates that demand is still there, although the rate of growth has unsurprisingly stopped month on month with no increase from August. It is clear that prospective buyers are becoming more cautious as the cost of borrowing increases.
“Rising inflation continues to pressurise the Bank of a England to increase base rate with another rise pre Christmas looking likely. This puts pressure on affordability calculations which should cool the market further. There is an incredibly complex balancing act required for the new leadership team in Downing Street.
“With tighter and more complicated financial decisions to make for borrowers, the role of mortgage brokers is ever more vital to assist those looking to purchase or refinance a property.”
