House prices: property market soars to new highs but ‘sweet spot won’t last forever’ amid political uncertainty

The housing market defied any expectations of a slowdown in June, with average property prices up 1.8 per cent month-on-month in the biggest monthly rise since early 2007.

Annually, UK house prices have increased by 13 per cent, marking the highest growth rate since late 2004, according to the Halifax index.

Across the UK, the average house price in June was a record £294,845.

In Scotland, the average house price passed the £200,000 mark for the first time.

Northern Ireland had the strongest annual house price growth at 15.2 per cent, and within England, the South West was the strongest region for annual house price growth, at 14.2 per cent.

Wales also continued to record a strong rate of annual growth, with house prices increasing by 14.3 per cent.

A slowing of house price growth should still be expected in the months ahead.

Russell Galley, managing director, Halifax, said: “The UK housing market defied any expectations of a slowdown, with average property prices up 1.8 per cent in June, the biggest monthly rise since early 2007.

“This means house prices have now risen every month over the last year, and are up by 6.8 per cent or £18,849 in cash terms so far in 2022, pushing the typical UK house price to another record high of £294,845.

“The supply-demand imbalance continues to be the reason house prices are rising so sharply.

“Demand is still strong – though activity levels have slowed to be in line with pre-Covid averages – while the stock of available properties for sale remains extremely low.

“Property prices so far appear to have been largely insulated from the cost-of-living squeeze.

Russell Galley, Halifax

“This is partly because, right now, the rise in the cost of living is being felt most by people on lower incomes, who are typically less active in buying and selling houses.

“In contrast, higher earners are likely to be able to use extra funds saved during the pandemic, with latest industry data showing that mortgage lending has increased by the highest amount since last September.

“Of course, the housing market will not remain immune from the challenging economic environment.

“But for now it continues to demonstrate — as it has done over the last couple of years — the unique combination of factors impacting prices.

“One of these remains the huge shift in demand towards bigger properties, with average prices for detached houses rising by almost twice the rate of flats over the past year (13.9 per cent versus 7.6 per cent).

“In time though, increased pressure on household budgets from inflation and higher interest rates should weigh more heavily on the housing market, given the impact this has on affordability.”

He added: “So while it may come later than previously anticipated, a slowing of house price growth should still be expected in the months ahead.”

Tom Bill, head of UK residential research at Knight Frank, said: “Frustrated demand that arose from a period of low supply has combined with concerns over rising mortgage rates to trigger a very active UK housing market. However, it is the sort of sweet spot that won’t last forever.

“Higher mortgage rates will eventually begin to curb demand, which could be compounded by political uncertainty if a general election is called.”

Jason Tebb, CEO of OnTheMarket.com, said: “Despite considerable headwinds, buyer and seller sentiment remains stable in the market. The supply-demand imbalance is behind the continued rise in prices, although this is slowly improving as more stock becomes available.

“Signs of an inevitable, yet subtle, rebalancing of the market, are already evident.  The ‘new normal’, an elevated version of the pre-pandemic market, continues, with serious property seekers still determined to move.”

UK house prices in June

Source: Halifax