Home » House prices hit sixth record in 2022, but pace slows: Rightmove

House prices hit sixth record in 2022, but pace slows: Rightmove

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The average price of a UK home hit a record for the sixth month in a row in July rising to £369,968 according to Rightmove.

But the 0.4% rise compares to a 9.7% jump in June, which is a sign of the market moving from “boil to simmer”, says the property website’s monthly House Price Index.

However, the report says: “A continuing desire to move and low numbers of homes for sale are driving further price growth even at a time when personal finances are becoming increasingly stretched.”

The report comes after the Bank of England has raised interest rates five times in a row since December to 1.25%, and inflation hit 9.1% in May, a 40-year high driven by higher food and energy bills.

The study says that first-time buyers now face record prices and rising interest rates, meaning that their monthly mortgage payments are now 20%, or £163, higher than at the start of the year.

It also adds that more buyers may lock in longer mortgage terms to bring more certainty to their outgoings, “especially as lenders are now offering virtually the same rate for either two-year and five-year fixed mortgages”.

Buyer demand continues to exceed historically normal levels and is now 26% higher than the same period in 2019, although down 7% on June 2021, says the study.

It adds there are signs of the seriously depleted stock situation improving, with the number of sellers up by 13% compared with this time last year, but the number of available homes for sale is still 40% down on where it was in 2019.

“This significant shortfall from more normal stock levels will help to underpin prices this year, as there are simply not enough homes coming to market to correct the balance between supply and demand,” the report says.

The firm says the slow rate of stock recovery has led it to revise its 2022 UK house price forecast up to 7% for annual growth, from 5% at the start of the year.

Rightmove director of property science Tim Bannister says: “Having more new sellers this month is a win-win for the market, as these sellers will likely achieve good prices for their homes given the sixth asking price record in a row that we’ve now seen, which may help to explain the increase in new stock coming to market over the last year. For those looking to buy, it means more choice, and a slight easing in competition against other buyers while the market is still moving very quickly.

“In the current fast-changing economic climate, those looking to buy who find a suitable home they can afford, may choose to act now rather than wait. While more choice is welcome news, the number of homes available remains well below the more normal levels of 2019 and is unable to satisfy the continued high demand that we’re seeing.

With such an imbalance remaining between supply and demand, prices look underpinned, and we would therefore only expect typical smaller seasonal month-on-month falls, rather than more significant price falls in the second half of the year.

“The challenges presented by rising interest rates and the cost of living will no doubt have an effect throughout the second half of the year, as some people reconsider what they can afford. However, there is also anticipation among would-be home-movers that personal finances may become even more stretched in the coming months, with further interest rate rises expected and the energy price cap jumping again in October.

“Given the political and economic uncertainty at the moment, those who want to move this year, particularly first-time buyers, may seek some financial certainty by locking in longer fixed-rate mortgage terms now before their monthly outgoings increase again.”

Hargreaves Lansdown senior personal finance analyst Sarah Coles adds: Asking prices tend to obscure more subtle moves in the market, and we’re seeing a number of small but important changes. With the number of buyers continuing to fall, and the number of sellers starting to rise, the imbalance that has pushed prices higher even as tougher times have hit could be starting to unwind, which would pour cold water on the overheated market.

“During the white heat of the market, buyers have had to offer well over the asking price in order to secure the property, with many of them drawn into bidding wars. As the market slows slightly, this kind of activity is less likely. In the Royal Institution of Chartered Surveyors report for June, only 50% of agents said that on average houses worth less than £500,000 were selling for more than the asking price. Meanwhile, those worth more than £1 million, were selling – on average – for less than the asking price.

“At this stage in the cycle, after such a massive rise in prices, there’s a risk that sellers are pricing in another round of hikes. With runaway prices, the market soon catches up and the property sells, but the June RICS report showed that overpriced properties were going nowhere, and in some cases, people were being forced to accept an offer.

“Agents also reported that more buyers are pulling out of agreed sales and trying to negotiate a lower price. Part of this is related to the fact that more mortgage lenders are down-valuing properties, and refusing to believe they’re worth what buyers are prepared to pay.

“None of these things will be reflected in asking prices, which means any buyers venturing into the market need to be careful about what they’re paying for a property. Now is not the time to be making a bold offer way in excess of either what you can afford or what the rest of the market thinks the property is worth.”

Finopulse

Disclaimer: This story is auto-aggregated by a computer program and has not been created or edited by Finopulse.
Publisher: Roger Baird

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