Average house prices increased by 12.6% over the year to October, up from 9.9% in September, according to the latest figures from the Office for National Statistics (ONS).
The ONS said the annual percentage change was partly caused by a sharp fall in average house prices in October 2021, following changes to Stamp Duty Land Tax.
On a monthly basis the unadjusted index rose by 0.3% in October. In seasonally adjusted terms, prices increased by 0.7%.
Following the increase, the average UK house price was £296,000 in October 2022, which is £33,000 higher than this time last year and little changed from last month.
While average house prices increased over the year to £316,000 (13.2%) in England, £224,000 in Wales (11.8%), £195,000 in Scotland (8.5%) and to £176,000 in Northern Ireland (10.7%).
Reaction
Scott Clay, head of introducers at specialist lender Together:
“The UK is now in recession, with the cost-of-living crisis worsening and consumer confidence depleting, however the newly released ONS figures show the housing market has defied all odds and has risen by 0.3%.
“This uplift is likely to be short-lived as a downturn is overdue and with many struggling to fit the tightening mortgage lending criteria of mainstream banks, consumer demand will continue to deplete.
“During these difficult economic conditions, specialist lenders will be able to offer flexible criteria for individual circumstances and assess applications on a case-by-case basis.”
Dariusz Karpowicz, director of Doncaster-based mortgage broker, Albion Financial Advice:
“That was then and this is now. This data, though skewed by the Stamp Duty holiday, has yet to reveal the full impact of the mini-Budget and the chaos of the past two to three months.
“Property values are almost certainly now heading down. However, I’m not convinced that house prices will fall by as much as 30% as some are predicting. That would be an apocalyptic event in the property market.
“Prices will undoubtedly stall and we could see drops of 10% in some areas but the lack of supply will act as a glass floor under property values.”
Ross Boyd, founder of the always-on mortgage comparison platform, Dashly.com:
“These figures, although affected by the Stamp Duty holiday, bear no reflection on where the market is at in December.
“The whole property and mortgage market has been turned on its head since the disastrous mini-Budget. With inflation still in double digits and mortgage rates on a different plane to where they were just six months ago, 2023 could be like 2008 all over again.
“It’s not inconceivable that average UK house prices could drop by 10%-15% over the course of the next year or two as we enter what the Bank of England predicts will be the longest recession since records began. Much will depend, of course, on how the jobs market holds up.”
Paul Holland, mortgage broker at Chatham-based Henchurch Lane Financial Services:
“The property market has seen gargantuan price growth over the past 2-3 years. Healthy and sustainable house price growth is annual growth of circa 2%-3%, not 10%+. When that happens, the wheels invariably come off.
“The growth we’ve seen is mainly due to the stamp duty holiday introduced in the summer of 2020 and demand across the board from people wanting to relocate due to the pandemic.
“Of course we expect a downturn in prices over the coming 12 months, but this should be viewed more as a correction than anything negative. The most likely outcome is a 5%-10% reduction over the coming year.
“Unless you purchased at 95% last year and intend to sell quickly, this shouldn’t be viewed as too precarious a situation.
“There will also be some really good buying opportunities for those who are in the right position during the next year or so as prices come down, especially first-time buyers. Assuming they can find the still sizeable deposit, of course.”
Andrew Montlake, managing director of the UK-wide mortgage broker, Coreco:
“I’ve never seen property market sentiment change in such a short timeframe. The property market was hit for six after the now infamous mini-Budget as mortgage rates soared and many people put their buying plans on hold due to the extreme uncertainty.
“House prices are set to come under further pressure during the winter months, but the sizeable drops of 10%-15% that some are predicting are frankly implausible given the sheer lack of supply and the fact that the jobs market is still strong.
“A nationwide correction of around 10% is a real possibility but in reality, a fall of 10% is just the froth coming off the market and a reversal of the unsustainable growth we have had since the Stamp Duty holiday.”
Gareth Lewis, commercial director of property lender MT Finance:
“While these figures are based upon transaction flow that started its journey in the summer, the signs are there that we are seeing values soften along with sales volumes.
“As we know, these figures will be further impacted in coming months due to the removal of mortgage products, and their replacement at considerably higher rates.
“There are difficult questions to be answered: homemovers need to carefully consider their options and decide whether it’s the right time to take on higher debt at a greater cost. Meanwhile, buy-to-let investors are being squeezed by the increased interest coverage ratio (ICR) test, limiting the amount they can borrow, so they will also need to decide whether they are able to put more money into a purchase.
“However, while there is still a lack of supply, the negative impact on values will be slow.”
Mike Staton, director of Mansfield-based mortgage broker, Staton Mortgages:
“The property market appears to have broken up for Christmas. I can’t remember a December being this quiet, however there is more at play here than an economic crisis.
“The World Cup and cost of living crisis, along with Christmas, have all contributed to an extremely slow December, but I do expect the industry to pick up in the New Year.
“I predict only a small increase of 0.25% from the Bank of England this month, which will give confidence back to lenders who will all be hoping to start 2023 with a bang.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman:
“At first glance, this most comprehensive of all the housing market surveys seems to demonstrate considerable resilience. However, digging a little deeper, these numbers reflect what was happening in late summer and early autumn, not what we’ve been seeing in our offices since.
“Most demand, fuelled by mortgages arranged on more advantageous terms, seems to have been satisfied.
“A better test will come in early 2023 when a large proportion of buyers have to decide whether they will continue to press the pause button or review their searches in response to lower mortgage rates and inflation figures.”
Paul McGerrigan, CEO at national fintech broker Loan.co.uk:
“All indicators suggest that after the recent unbridled price growth, some of which was driven by exceptional Covid-related measures, the property market is reaching its peak, with borrowers squeezed by rising interest rates and stubbornly high inflation.
“Whilst, the October House Price Index figures shows an annual increase in average house prices of 12.6% – to a high of £296,422 – this is about as far as it will go, though we don’t predict a slump in values. Interest rate increases are designed to quell inflation but they also create affordability challenges for borrowers which will drive a gradual cooling in the market.
“The underlying fact remains, there continues to be a considerable shortage of housing supply which should maintain a strong baseline for mid to longer term house prices. Getting inflation under control continues to be the biggest challenge for the UK economy and until this is achieved the pressure will remain on the MPC to move bank rate upwards. The balance is a fine one and must be managed with extreme caution.
“Today’s slight inflation rate drop demonstrates there is light at the end of the tunnel, and, whilst there may be a bumpy few quarters ahead, Government stability and economic prudence should prevail through the second half of next year.”
Nicky Stevenson, managing director at national estate agent group Fine & Country:
“Unprecedented volatility in the mortgage market following the mini-budget was not enough to derail the housing market in October.
“However, with the Bank of England forecast to announce a ninth hike in interest rates shortly, the outlook may be less rosy in the future.
“Increased borrowing costs and tax rises mean buyer affordability is being stretched to the limit, and there is growing evidence of asking prices starting to trend downwards.
“While no one can predict with any certainty where house prices will go from here, there is little doubt that there are challenging times ahead for buyers and sellers alike.”
Malcolm Webb, technical director at Legal & General Surveying Services:
“This latest data is a strong indicator that house prices are losing some momentum, as the effects of spiking interest rates and wider economic pressures ripple across the UK housing market. However, month-on-month house prices are just one variable; it’s worth remembering that property values are still higher than last year and market activity remains steady. There is also a great deal of regional variability that needs to be taken into account.
“As we move into 2023, any further slowdown in house price growth could help improve affordability in certain areas and provide opportunities for first-time buyers to step onto the property ladder. For many people, this first property purchase will be the most emotionally charged and financially complex decision of their lives to date, which means it’s important to get it right.
“Arranging a professional survey can ensure they make this decision with as much information as possible. In such a changeable market, expert advice is more valuable than ever for buyers looking to protect themselves from any unexpected costs or issues.”
