House price inflation looks set to be subdued
Housing market demand has seen the average UK property price hit just over a quarter of a million pounds for the first time, according to Zoopla’s latest House Price Index.
However, signs of a slowdown are emerging as homeowners face increasing pressure on their finances thanks to the surge in cost of living.
Rising house prices paired with increased interest rates mean the cost of repayments for a new mortgage for an average UK home has risen by £71 a month.
Yorkshire house prices have risen 9.1 per cent over the past year. Properties in Wales have shown the UK’s strongest growth with 11.6 per cent while London is lagging with the slowest rate of growth at 3.6 per cent.
While the housing market is still much busier than pre-pandemic norms, there are signs emerging that a slowdown is on its way.
UK house prices may be up an average of 8.4 per cent year on year but Zoopla predict that the rate of growth will fall to three per cent by the end of 2022.
Sales are also taking a few days more to reach sale agreed. Outside of London, the average time between listing and sale agreed for a three-bed house was up from 16 days in March to 18 days in April.
Price reductions are also rising with an increased number of properties listed where sellers have cut the asking price by five per cent.
Since the second half of April, one in 20 of properties listed for sale had a price reduction compared with one in 22 in the previous 28 days, a pattern seen in every region in Britain. The average reduction seen is nine per cent.
However, demand continues to outweigh supply with limited numbers of properties coming to market.
Gráinne Gilmore, head of research, Zoopla, says: “High levels of buyer demand mean that the market is still moving quickly, but the time to sell – the time taken between listing a property and agreeing a sale – is starting to rise across most property types in most locations.
“We expect that this measure will continue to rise during the rest of the year as buyer demand levels start to fall, punctured by changing sentiment around the cost of living and personal finances.
Another signal that the market is starting to soften is the number of properties where asking prices are being cut by more than five per cent. Some one in 20 properties has been re-priced this month, with the average new asking prices some nine per cent below the original. The annual rate of price growth will ease this year, on a monthly basis, price growth has already moderated. A continuation of this trend, even with some small monthly declines, means price growth will reach three per cent by the end of the year.”
Over at the Nationwide, Robert Gardner, Chief Economist, reported a slight slowing in annual UK house price growth to 11.2 per cent, from 12.1 per cent in April. Prices rose by 0.9 per cent monthon-month.
He expects the housing market to slow as the year progresses and says: “Household finances are likely to remain under pressure with inflation set to reach double digits in the coming quarters if global energy prices remain high.
“Measures of consumer confidence have already fallen towards record lows and the Bank of England is expected to raise interest rates, which will also exert a cooling impact on the market if this feeds through to mortgage rates.”