The May house price index from e.surv has found that despite the falling rate of house price growth, the average was still £7,360 higher than 12 months prior.
May was the ninth month of falling annual rates of house price growth, and the fifth month of falling prices paid for homes, making for a total drop of approximately £6,000.
The average house price was £373,066 in England and Wales, down 0.2% (£814) compared with April, and up 2% annually.
Richard Sexton, director at e.surv, said: “The trend is more material at the moment than the decrease itself as prices in 2022 on average gained £23,250 – almost 50% of the total average gain since 2020 of £58,000.
“For now this should be of some comfort to those worrying about negative equity.
“We are not building enough homes and while we have strong employment we would expect prices to be resilient.
“The cloud on the horizon is inflation which remains stubbornly high.
“Indeed stagflation is probably the greatest risk facing the UK economy. More interest rate rises are likely and this impacts affordability through higher mortgage rates.
“To see the impact of inflation to date, we need only look at the average interest rate on a two-year fixed rate mortgage which now stands at over 5.5% based on 75% [loan-to-value (LTV)].
“The mortgage market is pricing in a rise in the Base Rate in June which will further hamper many trying to move in what is traditionally a very busy time of the year for the housing market.
“Looking further forward, the market is now expecting the Bank of England base rate to peak at just over 5% by the end of 2023.
“Affordability, together with a lack of supply of the right kind of property, is now the key force shaping the housing market.
“Our prognosis is that house price inflation will continue to reduce albeit modestly without fiscal intervention and we expect buyers to be cautious and sellers become less ambitious.”
