What is happening to House Prices in the UK - May 2022

10th May 2022

If you are thinking about buying or selling a house you may well be interested to know what is likely to happen to house prices and whether now is a good time to move.

You may own a property already or are about to join the market as a first time buyer, and any adjustment in house prices can be of benefit to you. A fall in prices in the area you wish to buy can save you money, or a rise in your property's value can mean you could secure a good price and have more to invest in your next property purchase.

House prices are determined by a number of factors with the areas as follows:

The Economy

The overall health of the economy can play a part in consumer confidence, which impacts how confident people are to spend money, move home and how much they may be willing to pay.

Interest rates

The Bank of England (BoE) sets the base interest rate level and, if it is low, people can afford to spend more on a property as the cost of borrowing is lower and this tends to push house prices up.

Property Supply and  Demand

Local house prices will be determined by how desirable a particular location is and how many similar properties are available. Conversely, some properties will always command a premium because they are in a sought-after area where the housing stock is limited. And the opposite could be where a new housing development is completed, it can reduce the value of properties nearby as there is greater competition for buyers.

What has been happening to house prices?

There are a number of respected sources of data relating to house prices, including monthly indices that provide information on house price changes.

They provide data over history and often show good comparisons in month on month and annual swings:

 

The UK House Price Index

The UK House Price Index is the most accurate of the various house price indices as it is calculated based on completed sales, both for cash sales and those with a mortgage.

It uses a considerable range of house sales data from HM Land Registry, Registers of Scotland, and Land and Property Services Northern Ireland and is calculated by the Office for National Statistics.

While it paints a very clear picture of what is going on in the housing market, there is unfortunately a delay in the data being published with the latest data currently available relating to February 2022. It showed the average house price in the UK had risen by 0.5%, following a rise of 1.1% in the previous month, with year-on-year growth of 10.9%.

 

<h3">Nationwide House Price Index

The Nationwide House Price Index is calculated based on its own data of mortgage approvals as one of the largest lenders in the UK. The most recent figures show growth of 1.1%, which is high but not like the peak of 2.1% in August 2021, which was the second-largest monthly growth figure in the last 15 years. 

 

Rightmove House Price Index

The Rightmove House Price Index looks at the average asking prices for properties listed on the Rightmove portal instead of the previous two House Indexes which are based on mortgage approval data or completed sales,

It provides a good reflection of sellers' confidence, but doesn't clearly demonstrate how many of those properties end up going under offer at a lower price or not being sold at all.

 

  UK House Price Index Nationwide House Price Index Rightmove House Price Index
  January 2022 February 2022 February 2022 March 2022 February 2022 March 2022
Monthly change 1.1% 0.5%  1.7% 1.1%   0.3%  1.7%
Annual change 10.3% 10.9%  12.6% 14.3%  7.6%   10.4%
Average house price £275,28 £276,755 £260,230  £265,312 £341,167*  *£354,564 

 *denotes average asking price and NOT House Price

 

What is driving the change in house prices?

The housing market has been tumultuous over the past 2 years, with the pandemic having a direct impact on house prices.

Initially there was a slump as the country entered into lockdown for the first time in March 2020 before a very strong resurgence from June 2020, when society began opening up again. The stamp duty holiday was then introduced in July 2020 which was a key driver as it offered buyers a saving of up to £15,000 on their tax bill when purchasing a house. This acted as a stimulus, ironically driving house prices up by an average of £15,409 between June and November 2020 in effect wiping out the stamp duty saving.

The main stamp duty holiday ended at the end of June 2021, with it tapering down until the end of September, during which time buyers could save a maximum £2,500 off their bill. There was a corresponding uptick in house prices in the run up to the deadlines for the end of each of these phases and overall there was double-digit annual growth across the whole of 2021.

This was again bolstered by historically low mortgage rates, as well as the reintroduction of higher loan-to-value deals.

 

How do I know what my property is worth?

While it is useful to consider the broader market trends for the UK, it's also important to work out what is happening in your local area if you are planning to buy or sell a property.

There can be a great deal of variation in the price of a house on one street compared to the same style of house on an adjacent street, so it pays to do your homework. Good sources of information include:

Property websites: Sites such as Rightmove and Zoopla have features that give you an estimate of what your house is worth based on its sales history and what other local properties have sold for. These tools are not completely accurate but give you a good starting point to work out how much you could reasonably expect to sell your house for

Land registry data: It is possible to access the sold prices for all the properties in your local area, sorted by how long ago the property sold. This gives a good indication of what properties are actually selling for, compared with the asking prices that they are being marketed at.

If you are thinking of selling a property and are interested to know what it is worth, or wondering how much rent you could achieve, we have a number of different options for you to get a free no-obligation valuation.

Jeremy Wilkins

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