Annual house price growth returned to the realm of double digits in April. However, the warnings are that it could be as good as it gets.
The Land Registry House Price Index shows that UK house prices increased by 12.4% in the year to April 2022. This is up from 9.7% a month before to the tune of £281,161.
Every month, average house prices were up 1.1% from 0.3% in March. Sales volumes fell annually across the entire UK, albeit compared with the busy stamp duty holiday period. Transactions decreased by 31.7% in England, with Scotland at 0.6% and Wales with a fall of 9.1%. Northern Ireland’s volume of transactions saw a decrease of 19.3%.
Current Market Looks to Be Weaker
House prices rose faster only once since the onset of the global pandemic, which was during the rush of June 2021 during the end of the stamp duty holiday’s generous period. This timeframe pushed the UK housing market prices to unthought-of new highs.
In the meantime, homeowners have been benefitting from one side effect of inflation – the real value of mortgages dropping. Mortgage value dropped 9.1% in 12 months before the first single payments were even made.
This could end up being as good as it gets for property owners. These figures all reflect house purchase decisions that were made much earlier when the first interest rate rises were the only concern and the energy price cap had not even kicked in. in the majority of cases, buyers had made offers before the Ukraine invasion took place and well before its fed into the inflation.
May’s figures have every chance to show more weakness, with both Nationwide and Halifax already showing signs of falling back. In both cases, price rises were still unusually high, but the direction of travel is worth keeping note of.
The latest UK mainstream house price forecasts expect average values to go up by 7.5% for 2022, with affordability pressures looking to substantially moderate further price growth for the rest of the year. With the news that the Bank of England will remove affordability testing from August onwards, testing could mitigate some impact of higher interest rates.
In theory, this could provide more capacity for house price growth past this year.
Supply vs. Demand
Demand is still vastly outpacing the supply of available homes and, as long as this imbalance in the market continues, prices will continue to remain high. The cost of living is sure to show up in the housing market also, but buyers are continuing to outnumber available properties by 10 to 1, with over 80% of accepted offers at or over the asking price.