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 is still strong, but monthly prices down
When you average out the increases reported by all the major indices, house prices have risen 4.3% over the last 12 months, down from the 5% annual rise recorded last month.
It means the average UK home is now worth £294,329, according to HomeOwners Alliance.
We have seen a staggering rise in UK house prices since COVID struck.
A combination of incredibly cheap mortgages and cash-flush buyers led to double-digit growth each year since 2020.
However, the outlook has changed dramatically in recent months, with the cost of living crisis biting hard and the era of cheap loans coming to a crashing halt.
The results of this squeeze are now starting to show in house prices, and analysts say the outlook for UK house prices in 2023 is far more challenging.
Take a look at the graph below.
While annual data looks strong across all the different house price indices, things look far less rosy when it comes to monthly data.
What will happen to prices over the next year?
HomeOwners Alliance has warned that activity in the housing market could be ‘subdued’ in the near term until real incomes rise and the economic outlook is clearer.
“House prices fell in January and the annual rate of house price growth has continued to slow but house prices are still higher than they were at the start of 2022,” commented HomeOwners Alliance.
“There are encouraging signs that mortgage rates are beginning to stabilise but with higher borrowing costs, housing affordability remains stretched and activity is likely to remain subdued in the near term until real incomes begin to rise and the economic outlook becomes clearer.”
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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, the East Midlands showed the strongest growth at 12.3% followed by the North West at 12.2%.
Even the worst-performing region (Scotland) witnessed a 5.7% 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 or flatlined in all but four UK regions.
This suggests we are indeed going to see a drop-off in prices after years of rapid growth.
What the indices say
HomeOwners Alliance: “House prices fell in January and the annual rate of house price growth has continued to slow but house prices are still higher than they were at the start of 2022.
“There are encouraging signs that mortgage rates are beginning to stabilise but with higher borrowing costs, housing affordability remains stretched and activity is likely to remain subdued in the near term until real incomes begin to rise and the economic outlook becomes clearer.”
Rightmove – agent’s view: “Premium property prices seen over the last 18 months have largely disappeared which in turn has encouraged buyers back into the market and sales enquiries are on the rise.
“The initial shock to the housing market last autumn, after the mini-budget, has subsided.
“People are looking ahead and putting their moving plans into action.
“As mortgage rates start to lower and inflation moves under control, we’re seeing an uptick in demand from those who’ve taken a long-term view to invest in their next home.
“Many of our sellers are opting for realistic asking prices to reflect the changing market conditions.
“This puts them in a strong position to attract early interest, generate positive enquiries from good buyers, and increase prospects of an earlier sale.
“Along with increases in viewing levels seen so far in 2023, we're also receiving more requests for valuations.
“This bodes well for a reasonably balanced market in the months ahead, where supply and demand are more evenly matched.”
Nationwide: “The start of 2023 saw a further slowing in annual house price growth.
“However, there are some encouraging signs that mortgage rates are normalising, but it is too early to tell whether activity in the housing market has started to recover.
“It will be hard for the market to regain much momentum in the near term as economic headwinds are set to remain strong, with real earnings likely to fall further and the labour market widely projected to weaken as the economy shrinks.
“The biggest change in terms of housing affordability for potential buyers over the last year has been the rise in the cost of servicing the typical mortgage as a result of the increase in mortgage rates.
“Should recent reductions in mortgage rates continue, this should help improve the affordability position for potential buyers, albeit modestly, as will solid rates of income growth (wage growth is currently running at around 7% in the private sector), especially if combined with weak or negative house price growth.”
Halifax: “The start of 2023 has brought some stability to UK house prices, with the average house price remaining largely unchanged in January.
“We expected that the squeeze on household incomes from the rising cost of living and higher interest rates would lead to a slower housing market, particularly compared to the rapid growth of recent years.
“As we move through 2023, that trend is likely to continue as higher borrowing costs lead to reduced demand.
“For those looking to get on or up the housing ladder, confidence may improve beyond the near term.
“Lower house prices and the potential for interest rates to peak below the level being anticipated last year should lead to an improvement in home buying affordability over time.”
Zoopla: “It’s going to be a slow start to 2023 but we expect demand to pick up in the coming months as the economic outlook becomes clearer and mortgage rates settle around 4% to 4.5%.”
RICS: “The January 2023 RICS UK Residential Survey results continue to depict a muted market backdrop at present, with new buyer demand, sales, fresh listings and prices all reported to be on a downward trend.
“What’s more, near-term expectations suggest this picture is likely to remain in place for a while longer as the market adjusts to the higher interest rate environment.”
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