The latest house price index from the Office for National Statistics (ONS) shows that the UK’s average house price increased by 9.5% over the year to September, decreasing from 13.1% in August.
The most recent data shows the annual percentage change slowed due to house prices rising sharply in September 2021, when changes to Stamp Duty Land Tax were introduced.
House prices remained unchanged between August and September 2022, which has also had an impact on the fall in average yearly prices.
The average UK house price was £295,000 in September 2022, which is £26,000 up on this time last year, and unchanged since August.
In England, average house prices were up 9.6% over the year to £314,000, up 12.9% to £224,000 in Wales, up 7.3% to £192,000 in Scotland and up to £176,000 in Northern Ireland (10.7%).
Here’s how the latest figures have been received in the industry:
Stuart Law, CEO of the Assetz Group of property lending and investment companies, said: “This month’s ONS data shows that the end of cheap money, combined with the impact of inflation on household incomes, has finally brought the curtain down on the era of record house prices. Despite declining values, homeowners are perhaps feeling a little more secure than they might have, with the government’s return to sound economics stabilising rates and calming mortgage markets over recent weeks. This will ultimately shore-up demand and pricing, ensuring that house prices don’t drop as severely as they could have, and could recover more quickly, especially if inflation falls through 2023 as we expect it will.”
“Potentially declining prices will be of interest to buyers who might have given up hope of finding an affordable home over the last few months. But, these gains won’t markedly change the affordability challenges in our housing market as increased mortgage rates are likely to outweigh anticipated price corrections.”
“Buy-to-let landlords will face the biggest challenges, seeing asset values decline, while the costs of buy-to-let mortgages continue to rise, along with property running costs. This compounds the financial issues buy-to-let landlords have been struggling with for years, and we will likely see more come out of the sector, reducing rental stock and driving up rents for people already facing financial hardship. Property investors can still turn a profit from the rental sector and provide much-needed housing, at lower rents for tenants, but this is now far easier to achieve through alternative investment models, such as investing in portfolios of housebuilder loans which provide a stable monthly income, without the costs or stress of bricks and mortar.”
“Across the for sale and rental markets, we cannot tackle affordability and access to housing, or boost business growth in the housing sector, if we don’t build more homes. Along with the nation’s housebuilding community, we will be watching to see if tomorrow’s Autumn Statement marries fiscal discipline with a credible approach to supply-side reform, both of which are desperately needed to unlock development. If investment zones are to be scrapped, we need to know what’s next, and when.”
Andy Sommerville, director at Search Acumen, the property data and insight provider, commented: “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 a 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 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 fallthroughs.”
“We also anticipate significant spending cuts to already over-stretched government departments. In the housing market, this could mean further delays in processing transactions which are already 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. 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.”
Nick Ferrier, director of Jackson-Stops’ Midhurst branch, said: “The market retains significant energy, demand continues to outstrip supply. The steadiness in transaction levels and house price growth that we are now seeing month-on-month is simply putting the market back in line with a rate of activity that could have been expected pre-Covid and no different to the seasonal variations in the country market. Certainly, policy changes and government actions such as the Stamp Duty Holiday in 2020 helped to boost the market but it was demand that pushed activity levels up.”
“The market doesn’t have a crystal ball to predict what the Chancellor has planned for tomorrow’s Autumn Statement, but the expectation is that it will be an undynamic but steadying fiscal response. For prospective buyers that require a mortgage to finance their property purchase, we hope that they can be reassured that the partnership of Sunak and Hunt may precipitate mortgage rates falling slightly, with the Bank of England hinting at stability ahead next year.”
CEO of Alliance Fund, Iain Crawford, said: “We’re yet to see any real signs of a notable drop in house prices despite a turbulent few months and now that the government has steadied the waters, any movement is likely to be a gradual return to normality rather than a sheer market crash.”
“Of course, tomorrow’s Autumn Budget could put the cat amongst the pigeons in this respect. While it looks as though residential homeowners and buyers won’t feature directly, the nation is bracing for further tax hikes. Any dent to our post tax income is likely to further impact our ability to borrow and buy, which will translate to an overall reduction in market sentiment.”
Marc von Grundherr, Director of Benham and Reeves, commented: “The property market has continued to weather the storm of late and while we may have seen a reduction in buyer demand due to higher mortgage rates, we’re simply not seeing any downward pressure applied to sold prices, despite a static rate of growth on a monthly basis.”
“This is largely due to the fact that buyers have been keen to transact at pace in order to secure the rates currently on offer, before they climb even higher. In doing so, they’ve helped to maintain a consistent level of activity in the process which has kept the market afloat.”
James Forrester, managing director of Barrows and Forrester, said: “It’s incredibly hard to gauge the true health of the UK property market at present, with increasing mortgage rates leading to a period of turmoil, followed by a renewed level of certainty as a result of a government refresh.”
“That said, there remains a large degree of economic instability and this week’s Autumn Budget may well add to this.”
“At the same time, we can expect two things come December. Mariah Carey in the music charts and the usual seasonal slowdown in property market activity.”
“As it stands, the property market remains resolute, but we will have a much clearer view of things come 2023.”
Managing Director of HBB Solutions, Chris Hodgkinson, commented: “All current indicators suggest the market is starting to freeze over with homebuyers giving the idea of homeownership the cold shoulder following a sizeable uplift in the cost of borrowing.”
“This declining level of buyer demand is yet to cause house prices to actually fall, but the tide is starting to turn, and with the market now slowing right down until spring we can expect property values to follow suit sooner, rather than later.”
