Annual house price growth slips to 13.6% in August: UK HPI

Changes to stamp duty have been revealed as the main driving factor for a reduction in house price growth seen during August, according to the latest data released by ONS. Albeit slightly historic, the figures show that despite UK house prices increasing between July and August 2022, annual growth eased because of the sharp rise in house prices in August 2021 following changes in the stamp duty holiday.

Related topics:  Property
Property Reporter
19th October 2022
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According to the data, UK average house prices increased by 13.6% over the year to August 2022, down from 16.0% in July 2022 with average UK house prices at £296,000 - £36,000 higher than this time last year.

Looking at this regionally, average house prices increased over the year to £316,000 (14.3%) in England, to £220,000 in Wales (14.6%), to £195,000 in Scotland (9.7%) and to £169,000 in Northern Ireland (9.6%).

Kate Davies, Executive Director, IMLA, comments: “Today’s data should reassure homeowners of the resilience of the housing market, with prices remaining high. Having said this, there are numerous predictions that point to a decrease in prices in the coming months. The current cost of living crisis, along with record petrol and energy prices, rising inflation and tax rises mean most households are wary of moving up the ladder, putting a dampener on the extreme house price growth seen in recent years.

“While there have been recent talks of a ‘crash’ in the media, there is certainly no need to panic – property is a long-term investment and prices have always risen after short-term falls.

“However, housing supply still remains a pertinent issue and something that the new Government needs to set out a clear plan to address. Housebuilding is still well below the set figure of 300,000 a year that is needed to meet demand. The Government made it very clear that it had no intention of prolonging the Help to Buy scheme, which closes to new applicants at the end of this month, but the alternative schemes which have been developed to replace it cannot match the volume of demand. The added burdens and challenges on first-time buyers which have become evident over the past few months and weeks are going to require fresh Government thinking on how to help FTBs and how to kick-start new-build.”

Anna Clare Harper of real estate investment platform, IMMO, says: "House prices grew by 13.6% in the year to August, fuelled by shortage of supply and long-term growth in demand.

"This data is the most reliable of all house price indices since it reflects the whole of the market from official government figures. However, it’s also the slowest of the house price indices, and as we have seen, a lot can happen in a few short weeks. 

"As a result of what has happened since in terms of interest rates and confidence, going forward, the pace of house price growth is likely to slow. This will be driven in particular by interest rate rises, affecting the circa two million property owners on, or soon to be on, variable or standard rates on their mortgages. However, the largest tenure of housing in the UK is owner-occupied homes owned outright, meaning interest rate rises cause no pressure to sell. That said, the cost-of-living crisis affects us all, and constraints purchasing power for homeowners and private investors alike. 

"There is much talk of a house price crash. If the past is anything to go by, a correction in the pace of growth in the short to medium term is likely. However, we still have a severe shortage of quality, energy-efficient housing - both for sale and for rent. The fundamentals have not changed: we all still need a roof over our heads.

"There is an opportunity for professional investors to step in and re-capitalise the market, upgrade the quality and energy performance of existing housing, and benefit the people and their communities who still need a place to call home."

Paresh Raja, CEO of Market Financial Solutions, said: "Every house price index has taken on added intrigue of late. Everyone - from buyers and sellers to brokers and lenders - is watching to see how the market reacts to rising interest rates, high inflation and the prevailing economic and political uncertainty that has defined the start to Liz Truss' Premiership. Throw in the stamp duty cuts, one of the few policies to survive from Kwasi Kwarteng's ill-fated 38-day reign as Chancellor, and it makes predicting the direction of property prices very challenging.

"For now, as the ONS data shows, the sense is that demand will likely dip - the result of rising rates more than anything - but limited supply will ensure enough competition in the market to keep prices stable, if not growing. The stamp duty reductions, particularly for first-time buyers, should help keep the market buoyant; but unlike the stamp duty holiday of 2020/21, there is no deadline to this tax cut, so do not expect the same frenzied response of buyers rushing to benefit.

"Certainty is a rare but highly sought-after commodity right now. After several weeks of mortgages being pulled and some lenders no longer accepting new applications, borrowers and brokers are desperate to know what products they can access and at what price. Lenders that can act quickly, and transparently and commit to deals from the outset will emerge from this challenging period with their reputations enhanced. And only with certainty and clarity from lenders can buyers act with confidence; so, the performance of lenders will be key to how the market performs in the months to come."

Matthew Thompson, Head of Sales at Chestertons, says: “Despite increasing interest rates and the cost of living crisis, August remained a busy month for London’s property market. The number of buyer enquiries rose by 35% compared to August last year. One driving force behind the demand for homes is the return of professionals who are looking for a property closer to work.”

"The expectation that London’s property prices could see an adjustment has led to a further uplift in buyer demand across the capital in September. Compared to August, there were 17% more buyer enquiries and 18% more viewings. We are also encountering an increasing number of house hunters who want to secure a property as soon as possible and take out a fixed-rate mortgage. This has contributed to September’s property market also remaining busy and competitive. As the cost of living crisis is looming, some buyers are compromising on their priorities in order to secure a property under their initial budget.”

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