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House prices: biggest risers and fallers revealed

House prices: biggest risers and fallers revealed

House prices have soared over the last year, but growth is slowing. Our exclusive analysis explains why.

lovemoney staff

Mortgages and Home

lovemoney staff
Updated on 22 November 2022

Feeling a bit lost with so many house price indices out there? 

The HomeOwners Alliance House Price Watch looks at all the information from the many indices out there to give you one easy-to-digest round-up of everything you need to know.

So, let's look at how prices have changed over the past month and year.

Annual house price growth high, but slowing

When you average out the increases reported by all the major indices, house prices have risen 8.3% over the last 12 months, down notably on the 11% annual rise recorded last month.

It means the average UK home is now worth £295,903, according to HomeOwners Alliance.

Why house prices have soared

While you might have expected prices to tumble in recent years given the pandemic and general economic uncertainty, there are a number of factors that have combined to send prices soaring since COVID struck.

First off, it's no secret that borrowing has been incredibly cheap up until recently, which has allowed buyers to borrow ever-larger sums to keep pumping pressure into the market. 

While the era of cheap loans has ended with a jolt, this has only really impacted buyers in the last few months – you could still get mortgage rates as low as 1% in late 2021 – so we're only likely to see the full impact of this in the coming months. 

What's more, savers had built up significant pots of cash in recent years, thanks to a combination of low inflation between 2019 and 2021 and lockdowns limiting their ability to spend their cash.

This has allowed them to afford ever more expensive house purchases.

Again, the cost of living crisis has dramatically changed the outlook in recent months, but these sizeable savings pots would still have been inflating house prices in late 2021 and early 2022.

Finally, with many people expecting to work from home in the long term, homeowners have been rethinking where they want to live and what type of home they want and are looking to move into a property that better meets their changing needs.

Throw these factors together and you see why there's been a massive glut of buyers scrapping over a limited supply of properties in recent years, which has sent prices soaring. 

However, analysts believe the outlook for UK house prices looks far more challenging for the year ahead.

Monthly and annual changes in house prices. (Image: HomeOwners Alliance)

What will happen to prices over the next year?

 

While the combination of higher borrowing costs and a dramatic squeeze in household budgets will undoubtedly dampen demand, Nationwide believes we're likely to see a further slowing of house price growth rather than a dramatic fall in prices.

"The outlook is extremely uncertain, and much will depend on how the broader economy performs, but a relatively soft landing is still possible," it said.

"Longer-term borrowing costs have fallen back in recent weeks and may moderate further if investor sentiment continues to recover.

"Moreover, household balance sheets appear in relatively good shape with significant protection from higher borrowing costs, at least for a period, with over 85% of mortgage balances on fixed interest rates.

"Stretched housing affordability is also a reflection of underlying supply constraints, which should provide some support for prices.”

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What's happening to house prices near you?

Looking at the regional breakdown over the last 12 months based on Land Registry figures, Wales and the South West showed the strongest growth at 12.9% and 11.9%, respectively.

Even the worst-performing region (the North East) witnessed a 5.8% increase in house prices.

However, things look very different when you look at the monthly change in prices.

Admittedly these figures are far less reliable as they cover such a short timeframe, but it's interesting to note that house prices actually fell in four areas – including London and Scotland.

Regional changes in UK house prices. (Image: HomeOwners Alliance)

What the indices say

HomeOwners Alliance: “House prices fell in October and the annual rate of growth slowed sharply.

“The housing market received a significant shock from the mini Budget and the resulting acceleration of higher mortgage rates.

“While rates look to have peaked, for now, mortgage approvals have continued to fall as some would-be home buyers have inevitably paused their plans.

“As we move into 2023, a slower period for house prices is expected.

“Though the outlook is extremely uncertain, there is expected to be an adjustment in prices rather than a sharp fall.

“A solid jobs market and the continued shortage of homes for sale should help to support house prices.”

Rightmove: “The proportion of unsold properties seeing a price reduction has increased only slightly from the pre-pandemic 7.5% in October 2019 to 8% this October.

"However, it has doubled from the figure of 4% in the frenzied market of October 2021.

"Buyer demand is still performing better than it was during the more normal market of 2019, but it is clear that we have returned to a much more price-sensitive housing market after two years of a buying frenzy.

"The drop in buyer demand versus the strong market of last year is highest in the typical first-time buyer sector, with demand down by 26% on this time last year, though still up by 7% at this time in 2019.

"In the second stepper sector demand is down by 17%, and at the top of the ladder, there has been a drop of 15%.

"Overall, total demand is still 4% higher than in 2019, but 20% lower than in October last year as the ongoing financial uncertainty weighs on the market.

"It’s important to note that there isn’t a glut of unsold properties, and the average number of enquirers for the low number of available properties for sale is still over a third higher than it was back in October 2019, which is helping to prevent any price falls by more than is usual at this time of year.”

Nationwide: “The market has undoubtedly been impacted by the turmoil following the mini Budget, which led to a sharp rise in market interest rates.

"Higher borrowing costs have added to stretched housing affordability at a time when household finances are already under pressure from high inflation.

"The increase in mortgage rates meant that a prospective first-time buyer earning the average wage and looking to buy a typical first-time buyer home with a 20% deposit would see their monthly mortgage payment rise from c.34% of take-home pay to c.45%, based on an average mortgage rate of 5.5%.

"The market looks set to slow in the coming quarters.

"The outlook is extremely uncertain, and much will depend on how the broader economy performs, but a relatively soft landing is still possible.

"Longer-term borrowing costs have fallen back in recent weeks and may moderate further if investor sentiment continues to recover.

"Moreover, household balance sheets appear in relatively good shape with significant protection from higher borrowing costs, at least for a period, with over 85% of mortgage balances on fixed interest rates.

"Stretched housing affordability is also a reflection of underlying supply constraints, which should provide some support for prices.”

Halifax: “Though the recent period of rapid house price inflation may now be at an end, it’s important to keep this in context, with average property prices rising more than £22,000 in the past 12 months, and by almost £60,000 (+25.7%) over the last three years.

"The housing market received a significant shock as a result of the mini-budget and sudden acceleration in mortgage rate increases.

"While it is likely that those rates have peaked, for now, recent events encouraged existing mortgage holders to look at their options, and some would-be homebuyers to take a pause.

"Consumer caution has grown with mortgage approvals and demand for borrowing declining.

"With tax rises and spending cuts expected in the Autumn Statement, economic headwinds point to a much slower period for house prices.

"While structural market factors which support higher house prices – like the shortage of properties for sale – are likely to remain, how significantly prices might adjust will also be determined by the performance of the labour market.”

Zoopla: “A spike in two and five-year fixed mortgage rates hit demand, down a third since mini Budget.

"Sales are still being agreed at a slower rate, from cash buyers and those with cheap loans – with a pipeline of nearly 293,000 sales in progress.

"The outlook for 2023 depends largely on the trajectory for mortgage rates.

"Sustained 6% mortgage rates would lead to double-digit price falls eroding ‘paper’ gains over the pandemic but few negative equity cases.

"The more likely outcome is a fall in mortgage rates towards 4% and a modest decline in house prices of up to 5% over 2023 with one million sales.

"A robust labour market and scarcity of supply will support pricing but markets in southern England are expected to feel the greatest impact.”

RICS: “The October 2022 RICS UK Residential Survey results point to a further deterioration in market conditions over the month, with the fall in buyer demand and agreed sales gathering pace.

"On the back of this, house price growth has now ground to a halt at the national level.

"Respondents across all parts of the UK are now (on balance) of the opinion that prices will see some degree of decline over the year ahead.”

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