Market snapshot suggests ‘it’s absolute madness to think house prices will keep on rising’

UK house price growth slowed slightly in June, increasing 10.7% year-on-year, down from 11.2% in May.

According to the data, released by Nationwide yesterday, the average property price still hit a record high of £271,613, with prices increasing by more than £26,000 in the past 12 months.

Monthly, property prices edged up by 0.3% from May to June, according to the building society.

London continues to have the slowest house price growth, despite having the most expensive properties.

Robert Gardner, Nationwide’s chief economist, said: “The housing market has retained a surprising amount of momentum given the mounting pressure on household budgets from high inflation, which has already driven consumer confidence to a record low.”
England has the most expensive average price of £309,774, followed by Wales at £208,309 and Northern Ireland where the average price is £181,550.

Industry reaction:

Guy Harrington, CEO, Glenhawk, commented: “Another month of slowing growth is just a precursor to the sharp correction about to torpedo the UK housing market, caused by a perfect storm of record inflation, geo-political turmoil, rising rates and a once-in-a-generation cost of living crisis. It’s absolute madness to think house prices will keep on rising. As caution grips the market, the outlook for 2023 looks increasingly ominous.”

Andrew Simmonds, director Parker’s Estate Agents, said: “The South West has been exceptionally buoyant for the past two years, almost certainly due to post-pandemic living and working styles. That said, I certainly see the market cooling among properties north of £600,000. However, the right properties valued at the right level will always sell.

“Unfortunately, vendors have seen the market grow exponentially over the past few years and, more often than not, are asking to list their property at a slightly over-egged asking or guide price. We are seeing valuers down-value properties more often than not, but as a rule anyone who challenges a valuation with strong evidence does tend to turn a valuer’s perspective.
“We are seeing more stock enter the marketplace than we have experienced in the past 12 months, but buyers are now contracting back into their shells a little. The rest of 2022 will be interesting. I certainly do not see the same growth as previous years, perhaps fairly static values and certainly not prices falling.”

Richard Davies, MD of Chestertons, said: “In June, our branches have seen an incredible jump of 47% in buyer enquiries compared to June last year. Although there has been a slight dip in viewings of 12% over the same time period; likely due to people taking advantage of a summer holiday for the first time since the beginning of the pandemic; the growing buyer demand indicates that house hunters are looking to make their next move over the coming months.

“Overall, London’s property market remained extremely active throughout the second quarter of 2022 and supply continued to be outstripped by demand, putting further pressure on prices. The Bank of England’s interest rate rises were yet another incentive for many buyers to prioritise their house hunt in order to lock in favourable rates. Looking ahead, we predict the micro markets of central London to become particularly competitive as some of our local offices are noticing a gradual return of buy-to-let investors who are lured back into the market by rising rents and the potential of higher profits.”

Iain McKenzie, CEO of The Guild of Property Professionals, commented: “With an 11th consecutive month of house price rises and yet another record high, the market is in rude health, but the tell-tale signs that it’s losing momentum are becoming impossible to ignore.

“The strong employment rate and low housing stock are pushing the housing market upwards, while rocketing inflation and a slow ratcheting of interest rates are acting to pull it back downwards.

“These forces are finely balanced at the moment, but we’re likely to see the market continue to cool over the coming months.

“The trend of buyers fleeing congested cities continues, with London seeing the weakest growth, and the South West, East Anglia and Wales being the strongest performing regions.

“Since the start of the pandemic, prices in the South West have risen at almost double the rate of properties in London, and it’s hard to know whether demand in the capital will ever return to previous levels.”

Tom Bill, Head of UK Residential Research at Knight Frank, said: “The rate of inflation is fast catching up with UK house price growth, which stubbornly remains in double digits. How can house prices rise to such an extent during a cost-of-living squeeze? The answer is that they are both increasing largely for the same reason – a supply chain disruption.

“Property listings are rising as more sellers sense the market is peaking, but it will take time to filter through to prices. We expect UK prices to end the year at 8% before calming down further in 2023 as supply and demand rebalance and higher mortgage rates increasingly put the brakes on exceptionally high levels of demand.”

SOURCE: Property Industry Eye | JULY 1, 2022 | MARC DA SILVA