Signs of a slowdown but no risk of a crash, say experts
Average house prices fell marginally by 0.1 per cent in July, the first decrease since June
2021 but the average year-on year growth in the UK was 11.8 per cent, according to the latest figures from the Halifax.
Wales with a 14.7 per cent rise and the South West with 14.3 per cent topped the UK table.
London has the lowest house price inflation with 7.9 per cent, though this is the highest growth in the capital in almost five years.
Yorkshire recorded a 10.4 per cent annual increase between July 2021 and July 2022, taking the average house price in the region to £205,249. The national average is £293,221.
Halifax managing director Russell Galley says: “It’s important to note that UK house prices remain more than £30,000 higher than this time last year.
“While we shouldn’t read too much into any single month, especially as the fall is only fractional, a slowdown in annual house price growth has been expected for some time.
“Leading indicators of the housing market have recently shown a softening of activity, while rising borrowing costs are adding to the squeeze on household budgets against a backdrop of exceptionally high house price-toincome ratios.
“That said, some of the drivers of the buoyant market we’ve seen over recent years, such as extra funds saved during the pandemic, fundamental changes in how people use their homes, and investment demand, still remain evident.
“The extremely short supply of homes for sale is also a significant long-term challenge but serves to underpin high property prices.
“Looking ahead, house prices are likely to come under more pressure as those market tailwinds fade further and the headwinds of rising interest rates and increased living costs take a firmer hold. Therefore a slowing of annual house price inflation still seems the most likely scenario.”
The Halifax data also shows that price gains for bigger houses are noticeably outpacing those for smaller homes. The price of a detached house has leapt by 15.1 per cent over the last year, compared to 7.7 per cent for flats.
Concerns that there may be a property crash amid the cost of living crisis have been banished by
David Hannah, Group Chairman at Cornerstone Tax.
He says: “The crash of
2008 happened because of a sudden loss of liquidity in the international banking market and we aren’t in that same situation.
“We have had the pandemic and substantial government spending which has increased interest rates but the question is, will the global lending system be able to maintain the liquidity it lost in 2008?
“I think the answer is it will. We are certainly not going to see, as some have predicted, 20, 30 or 50 per cent falls in house prices.
“Also, If you borrow a hundred thousand pounds today, that fixed figure doesn’t rise in line with inflation.
“So, in five years time that debt could be worth half what it is today. In high inflationary times with relatively low interest rates, it makes sense to borrow.
“The debt is being eroded by inflation, whereas the value of the asset is going up in line or ahead of inflation.
“We also have an open market in the UK which means not only are domestic purchasers looking to buy, inbound investors are too.
“This means that even if demand cools domestically, international buyers could contribute to maintaining prices.”