House prices increased by 0.4% in August, recovering from a 0.1% decrease in July, the latest Halifax house price data has revealed.
While the annual rate of growth has eased it still stands in the double digits at 11.5%, down from +11.8% in July.
As such a typical UK property now costs a record £294,260.
Wales remains at to the top of the table for annual house price inflation, up by 16.1%, the strongest level of growth since early 2005.
This means average prices have risen by £31,246 over the last year, with an average property now costing £224,858.
The South West of England also continues to record a strong rate of annual growth, up by 14.5%, with an average property cost of £313,003.
The rate of annual growth in Northern Ireland eased back further last month to 12.5%, with a typical home now costing £185,505.
Scotland also saw another slowdown in the rate of annual house price inflation, to 9.4% from 9.5%.
A Scottish home now costs an average of £204,362, another record high for the nation.
While London has continued to lag behind other nations and regions, the rate of annual house price inflation in London rose again to now stand at 8.8%, its highest level in over six years.
With a typical property costing a record £554,718 the capital’s average house price has risen by £44,669 over the past 12 months.
Kim Kinnaird, director, Halifax Mortgages, said: “The slight fall seen in average house prices in July (0.1%) was offset by a return to growth during August – although the increase (0.4% month-on-month) was relatively modest compared to the rapid inflation we’ve witnessed in recent times.
“Over the last year the rate of monthly house price inflation has averaged around 0.9%.
“The typical house price reached another record high in August (£294,260) – as it has done in seven out of the eight months so far this year. However, the annual rate of growth dropped to 11.5%, from 11.8% in July, the lowest level in three months.
“While house prices have so far proved to be resilient in the face of growing economic uncertainty, industry surveys point towards cooling expectations across the majority of UK regions, as buyer demand eases, and other forward-looking indicators also imply a likely slowdown in market activity.
“Firstly, there is the considerable hit to people’s incomes from the cost-of-living squeeze. The 80% rise in the energy price cap for October will put more pressure on household finances, as will the further increases expected for January and April.
“At the levels being predicted, this is likely to constrain the amounts that prospective homebuyers can afford to borrow, on top of the adverse impact of higher energy prices on the wider economy.
“While government policy intervention may counter some of these impacts, borrowing costs are also likely to continue to rise, as the Bank of England is widely expected to continue raising interest rates into next year.
“With house price to income affordability ratios already historically high, a more challenging period for house prices should be expected.
“However, this should be viewed in the context of the exceptional growth witnessed in recent years, with average house prices having increased by more than £30,000 over the last 12 months alone.”
Reaction
Nathan Emerson, CEO of Propertymark:
“Pre-pandemic seasonal trends are re-emerging as a summer lull continues within the market. However, buyer confidence remains strong pushing up the average time to sell to record breaking levels at over four months.
“The wider economic climate and rising energy costs have meant that buyers are negotiating harder and more and more buyers each month are starting to secure homes under the asking price.
“The number of properties coming the market is fairly static and interest rates remain at a historically low level despite recent rises so we anticipate that house prices will continue to slow in growth month on month but won’t drop significantly before the end of the year.”
Conor Murphy, CEO, Smartr365:
“As house price growth continues to show signs of subsiding, this signals positivity for the market amidst an economic climate that is expected to see interest rates continue to rise in the coming months.
“With borrowing becoming more expensive prospective buyers will likely find considerable respite in the plateau in house prices we are seeing, after what has been a period of unprecedented growth. In an already healthy and buoyant market, it is likely this will lead to sustained demand.
“As has been the case for much of this year, the role of brokers is now more than ever to ensure mortgage applications are processed as quickly and efficiently as possible so that buyers can lock in the products and rates of their choice, before these are removed and replaced. Using technology to ensure they are delivering a best in class service under these circumstances is absolutely key.”
Marc von Grundherr, director of Benham and Reeves:
“Yet another record rate of house price growth demonstrates that the UK property market is very much marching to its own tune at present and we can expect it to continue to do so as we head towards the final stretch of 2022.
With the London market now starting to shift through the gears, this will only bolster the might of the property market further and bring an even greater boost to house prices over the coming months.”
James Forrester, managing director of Barrows and Forrester:
“Every time we think the housing market is starting to wobble, it rebounds to reach yet another record high, defying the economic angst that has engulfed the nation in other areas of our day to day lives.
“Despite the increasing pressure on our household finances, the nation’s buyers continue to fight tooth and nail to climb the ladder and this sustained demand has helped keep any downward pressure on property values at bay.
“We can, of course, expect this high level of market momentum to ease as we head towards Christmas. But make no mistake, this is a seasonal trend that materialises in the same way Mariah Carey does come the 1st of October and any negative movement is sure to be reversed once the market reopens for business come January.”
Almas Uddin, founding director of Revolution Brokers:
“We’ve seen the level of buyers entering the market via the mortgage sector remain robust in recent months and this ongoing demand has helped the market sidestep any decline in house prices thus far.
“Of course, with a further increase in interest rates expected, the cost of borrowing is only going to grow as the months go on. With the cost of living crisis also putting a pressure on our household finances, it’s inevitable that the market will show some signs of slowing, but exactly when remains to be seen.”
Chris Hodgkinson, managing director of HBB Solutions:
“There’s no doubt that the UK property market is taking far longer than expected to buckle under the pressure of wider economic instability, but cracks are certainly starting to show, as the rate of house price growth starts to ease.
“The nation’s sellers have started to realise that they can no longer expect the inflated price for their home that had become commonplace during the pandemic and they are having to adjust their asking price expectations accordingly.
“We’re also seeing a far greater degree of caution from lenders which is increasing the likelihood of a down valuation even after a price has been agreed by buyer and seller. This is leaving them adrift by around £8,000 on average and it’s only a matter of time before this market instability shows its face where topline property values are concerned.”
Tomer Aboody, director of property lender MT Finance:
“As the rate of house price growth slows, we are seeing clear signs of a market that is cooling. Buyers are still active and looking to purchase but are now more selective and calculated in their offers, taking into consideration higher mortgage rates, higher inflation and higher energy costs. Sales are happening but at a slower pace.
“As the market continues to take shape going forward, a possible government intervention is needed to restructure stamp study, allowing and helping buyers to get on the ladder and reducing the pain of higher mortgage rates a little.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman:
“Although we’ve noticed at the sharp end prices and activity has softened a little, market resilience continues to defy almost daily predictions of a slump.
“Worries about the rising cost of living, successive interest rate rises and possibility of recession next year have not been sufficient to prompt a correction while such a significant mismatch between demand and supply remains, although prices may be more sensitive.”
Avinav Nigam, co-founder and chief operating officer of real estate technology platform IMMO:
“Although the annual rate of house price growth eased slightly in August, prices still rose by more than £30,000 over the past 12 months, outstripping average wage growth.
“The annual growth figure is more relevant than monthly changes, as the market moves slowly. The explanation of change lies in demand: fewer transactions and mortgage approvals indicate that the hot demand we have seen is beginning to show signs of cooling. Historically, August tends to be one the strongest months, with 6 to 7 per cent higher nominal prices over the annual average, and these figures from the Halifax indicate the market is starting to correct.
“This slight cool down is good news for house buyers struggling with the worsening affordability situation, amplified by rising debt and energy prices. The trouble is, we still have an acute shortage of properties for sale and rent which are of good quality and affordable, in the places people want and need to live.
“Existing homes require to be upgraded to align with Minimum Energy Efficiency Requirements before they can be rented out, triggering a further slowdown in retrofitting projects and an exodus of landlords. With mortgages climbing higher, it’s even harder to enter the property market for a first-time buyer. The result is a lack of affordable housing options for home buyers.
“This problem gets worse each month that house price growth continues to outpace wage growth. This makes the provision of quality rental housing even more important. The newly-appointed PM has this task cut out for her and urgently needs to take suitable action to control the worsening housing crisis.
“Given we all need a roof over our heads, we will see the market shift from home buying to renting. The way forward has to be with professional landlords stepping in, providing quality rental housing at affordable prices.”
Mark Harris, chief executive of mortgage broker SPF Private Clients:
“With the markets betting on another rate rise this month, the impetus on borrowers to move quickly to secure a competitive deal continues.
“Lenders have money to lend and are keen to lend although volume management is the name of the game. There are still good deals to be had although rising energy bills are impacting affordability calculations and lenders are broadening their policy for higher income households accordingly.”
Conor Murphy, CEO, Smartr365 comments on the latest Halifax HPI:
“As house price growth continues to show signs of subsiding, this signals positivity for the market amidst an economic climate that is expected to see interest rates continue to rise in the coming months.
“With borrowing becoming more expensive prospective buyers will likely find considerable respite in the plateau in house prices we are seeing, after what has been a period of unprecedented growth. In an already healthy and buoyant market, it is likely this will lead to sustained demand.
“As has been the case for much of this year, the role of brokers is now more than ever to ensure mortgage applications are processed as quickly and efficiently as possible so that buyers can lock in the products and rates of their choice, before these are removed and replaced. Using technology to ensure they are delivering a best in class service under these circumstances is absolutely key.”
Andrew Montlake, managing director of the UK-wide mortgage broker, Coreco:
“It’s beyond reason that annual house price growth is still comfortably in double digits and that prices rose in August. But with more rate rises on the cards and the cost of living crisis set to crescendo, the property market will soon come back down to earth.
“Higher mortgage rates and the immense pressure on household finances will almost certainly start to temper demand in the months ahead.
“Even then, the abject lack of good quality, affordable housing will support prices even as we go through an unprecedented cost of living crisis.
“There’s life in London yet and the capital may see further house price growth if the remote working trend goes into reverse as people focus on retaining their jobs during the dark economic days ahead.
“House prices in the capital, as the engine room of the UK economy, could bizarrely benefit from a recession, as the regions go into reverse.”
Edgar Rayo, chief economist at London-based finance broker, Finanze:
“Truss’ proposed tax cuts to stimulate the economy will most likely see interest rates rise further and affect millions of existing and prospective borrowers during what’s predicted to be a severe and protracted recession.
“Although the Bank of England denies speculations from analysts that interest rates will hit the same level seen during the early 80s, the new Prime Minister’s strategy has serious implications for the mortgage market since it will likely compel Threadneedle Street to hike its benchmark interest rate closer to the 3.25% threshold in 2023.
“This will mean materially higher payments for those not locked into longer fixed-term mortgages, which shield them from interest rate hikes. Liz Truss’s expansionary measures are designed for a short-term GDP and productivity boost, but their impact on property prices could be profound.”
Mark Robinson, managing director of Southampton-based Albion Forest Mortgages:
“August was busier than ever, with first-time buyers especially active. Even as we enter a very dark winter for the economy, I cannot see house prices falling due to the sheer lack of supply. We are, however, far more likely to see a slower rate of house price growth.
“Though there is slightly less competition than a year ago as some prospective buyers put their plans on hold amid the cost of living crisis, it’s still a sellers’ market.”
Ross Boyd, founder of the always-on mortgage comparison platform, Dashly.com:
“The days of double digit price growth will soon be over as a long and cold winter looms. The obscene rise in energy bills is something that needs to be proactively addressed by lenders as the current batch of green mortgages are little more than a gimmick.
“Using personalised data to target individual properties, we’re currently working with a variety of high street lenders with a view to embedding energy-efficiency measures into people’s mortgages where applicable.
“It’s in the interest of both the homeowner who will pay cheaper bills and the lender, as energy-efficient homes will retain value and also mean borrowers are less likely to default due to astronomical energy prices.
“Now is the time for the mortgage industry to go green in earnest rather than continue along the current path of largely token green products.”
Samuel Mather-Holgate of Swindon-based advisory firm, Mather & Murray Financial:
“Even though the economy is expected to be in the bin for the next 12-18 months, I don’t expect the property market to implode as the UK still suffers from a massive housing shortage.
“We will almost certainly, however, see a marked slowdown in the rate of price growth. Transaction levels may well go off a cliff as moving house is not a priority when you are penny-pinching due to frightening increases in energy bills, food shopping and the cost of living more broadly.”
Ross McMillan, owner at Glasgow-based Blue Fish Mortgage Solutions:
“Though the property market remains in a relatively healthy state for now, there’s nowhere near the frenzied activity that has defined the market during the past couple of years.
“We’re typically now seeing just two or three buyers competing for a property rather than two dozen, as was the case this time last year. In some instances, some old-fashioned negotiation between a single buyer and seller is now making a comeback.
“While there is still a general lack of supply, sellers’ expectations are also becoming more reasonable and generally more in line with valuations. The current flattening in the market and greater equilibrium between buyers and sellers is a good thing and in the past month I have had several clients make successful offers after some had been looking and offering unsuccessfully for over two years.
“Unlike the Global Financial Crisis of 2007/08, arguably the most important element of the housing market is that it remains fluid and functional so while prices may stagnate or fall slightly due to the cost of living crisis, I am confident that demand will remain and transactions will continue, albeit at lower levels than the past two years.”
Mike Staton, director of Mansfield-based Staton Mortgages:
“August is usually a relatively quiet month in the mortgage and property market, but this time round there were no signs of a dip in activity. It may be that people are keen to buy, lock into a low rate and batten down the hatches before we enter a time of potentially extreme economic turbulence.
“First-time buyers remain a particularly active demographic within the market, with many now looking at higher loan-to-values of 90% to 95% mortgages due to the house price inflation of the past two years.
“Though we are starting to see a reduction in the level of competition to buy houses, it remains a sellers’ market for now as there are still more than enough buyers out there.”
Lewis Shaw, founder of Mansfield-based Shaw Financial Services:
“August, as absurd as it may sound, was off the charts, with first-time buyers leading the way. The volume of enquiries and calls we’re getting remain at record levels, which is starting to feel a bit odd given the cost of living crisis and rising interest rates. It should be getting quieter, yet we’re seeing the opposite.
“With two years of breakneck house price growth, it’s as though the property market has uncoupled from the economic train and is now freewheeling down the tracks without any brakes.
“Let’s hope for a gradual slowdown rather than crashing into the barriers. The fact that we’re now seeing loans for prime borrowers nudge over 5% may well start to see demand fall slightly and result in a cooldown rather than a crash.”
Imran Hussain, director at Nottingham-based Harmony Financial Services:
“August is historically a quieter month, like December, but this year, despite the fact rates are rising and bills are skyrocketing, it was like the Wild West. With rents rising quicker than ever before, we’re finding that first-time buyers are keener than ever to get onto the housing ladder. Mortgage rates may be rising but in many cases it’s still cheaper to own than to rent.”
Michael Aldridge, director of Chippenham-based Lucra Mortgages:
“Despite the growing number of doom and gloom prophecies, the housing market continues to defy logic and house prices continue to boom. Some analysts predicted the property market would be on its knees by now but despite an apparent perfect storm it still remains very buoyant.
“Without doubt, the squeeze on household spending will start to have an impact on demand and, in turn, prices, but several factors are counterbalancing this. Housing stock remains very low, employment levels very high and though interest rates are rising, they are still at historically low levels. Though the rate of price growth will almost certainly start to cool, I just can’t see a crash.”
Edward Checkley, managing director of London-based property finance specialists, Advias:
“August has been consistent with most of 2022, with people transacting against a backdrop of rate hikes, slow conveyancing and drawn-out lender processing. Buyers looking for the right property are still looking and taking the view that a mid-3% mortgage rate is still good in terms of longer-term averages.
“Investors are certainly reappraising their strategies as limited company rates are typically north of 4%, with some tipping into the 5% space.
“We have certainly noticed a slowdown from overseas buyers who face a double surcharge cost in stamp duty and less attractive interest rates to offset this cost. We believe that house price growth will level out from here, with the lack of housing supply keeping a decline at bay from the inevitable economic jitters and the cost of living crisis.”
Charles Yuille, managing director of Bath-based Willow Brook Mortgages:
“With inflation going through the roof and energy bills set to hit terrifying heights, a moderation in the rate of house price growth is now inevitable, but the egregious lack of stock will prevent any material drop in house prices.
“The cost of living crisis is definitely hitting wallets and confidence hard but for now the employment market remains strong. As long as people have jobs, there will be demand for property. If jobs start to go at scale, that’s when we could see prices fall.”
Graham Cox, founder of the Bristol-based broker, SelfEmployedMortgageHub.com:
“For us, August was still busy but we’ve noticed a marked change in buyer sentiment since the new energy cap was announced. Whilst some lenders attempt to mitigate the effects of higher mortgage rates by increasing their maximum loan-to-income ratios, that’s mainly for employed applicants. The self-employed are largely restricted to 4.5 times income.
“Property prices have ballooned to increasingly absurd levels over the past two years and are unsustainable. I believe we’ll see a 5-10% fall over the next year. We actually need house prices to not increase at all for about a decade or more, to allow wages to catch up.”
Jamie Thompson of Manchester-based Jamie Thompson Mortgages:
“There’s no such thing as a buyers’ market in the UK. I don’t think there ever will be again. The only way to tip the balance back towards buyers and away from existing owners who are now sat on eye-watering amounts of equity in their property it to build more homes and we’re not doing that.
“I’m doing mortgages at the moment for people who bought their first house just two years ago placing down 5% and 10% deposits who now have so much equity they are moving up from small starter homes to detached family homes.
“Lenders’ criteria are getting more lax by the day with Nationwide extending the 5.5 times income limit to existing customers, not just first-time buyers with higher incomes, and Halifax and Accord are also increasing the maximum borrowing amount for many borrowers. As the banks allow buyers to borrow more they will increase their bids and house prices will remain high. It’s simple economics.”
Dominik Lipnicki, director of Your Mortgage Decisions:
“August proved to be a busy month, especially on the remortgage front with borrowers keen to fix their mortgage rate. So far, the housing market has remained strong but house price increases are likely to dampen as the cost of living crisis bites.
“Without a doubt, we face an uncertain future with some predicting mortgage rates unseen for well over a decade.”
Scott Taylor-Barr of Shropshire-based broker, Carl Summers Financial Services:
“We’re entering uncharted waters in terms of the economy, so how things play out ultimately is as much luck as judgment. I’ve personally seen a noticeable reduction in the number of enquiries coming in for people looking at buying property, but many people are keener than ever to review their existing mortgage, so activity is still at the same level in the mortgage market overall.
“The shift away from property purchase will no doubt have an impact on house price growth, maybe even stalling it completely for a period, but I can’t see any widespread falls in house prices as long as mortgages are still available to the majority of potential buyers.
“If mortgage lenders for some reason constrict mortgage availability, then that may have a negative effect on house prices, as only those with excellent credit scores and larger deposits will be in a position to buy.”
Rob Peters, director of Altrincham-based Simple Fast Mortgage:
“August was another strong month to bolster a year of strong months. While many naysayers have predicted the property market’s wheels to come flying off, for now at least the market has defied the laws of inflation and energy rises to come out victorious again.
“The almost frantic stream of new buyers has been replaced by a seemingly steady stream of movers and remortagers with many investors sitting on the sidelines ready to pounce should economic opportunity come knocking.
“So no drastic change just yet, but like the weather as we approach Autumn, it does feel as though the wind has shifted course slightly.”
Nicky Stevenson, managing director at national estate agent group Fine & Country:
“The outlook for the housing market may depend on the stimulus measures currently being finalised by the new Prime Minister.
“At present, disposable incomes are being eroded by inflation which is causing a very gradual slowdown in annual price growth.
“A package of tax cuts and energy price freezes could boost buyer affordability, reverse the current softening in the market, and give a second wind to the boom.
“Meanwhile, London continues to make year-on-year gains as workers drift back to the office. Momentum in the capital may well accelerate in the months ahead regardless of the picture elsewhere.”
Iain McKenzie, CEO of The Guild of Property Professionals:
“House prices returned to business as usual after their tiny dip last month, but there can be no ignoring the growing signs that the market is calming down.
“Demand is slowly easing in most parts of the country as soaring inflation and rising interest rates start to turn the screw on consumers and the economy.
“That is not the case in the capital, where housing continues to see unprecedented growth in prices, in a market that was already unaffordable for many. The highest annual house price inflation in six years in London reflects the sense of back to business, reversing the years of employees moving out of cities during the pandemic.
“All eyes will be on the property market in the coming months to see how rising household bills affect both house prices and the demand to move.
“As we have seen in the past, there is still demand during periods of economic troubles, with around half of buyers having to move because their living situation changes. This demand may well keep prices buoyant for the rest of the year.”
