House price inflation continued to slow in September, with prices rising 9.5 percent over the year compared to an increase of 13.1 percent in August, according to the latest ONS data.
However, house prices did not change from month to month. The average home value in the UK was £295,000 in September 2022, an increase of £26,000 from this time last year, but unchanged from August.
The figures are based on prices sold at the Land Registry, and so must be taken into account property sales that were agreed upon at a time when mortgage rates had already begun to rise over the summer but before the mini-budget triggered leaps and bounds.
Interpreting the figures, the ONS said annual percentage change slowed this month because UK house prices rose sharply in September 2021, which coincided with changes in land stamp tax.
House price growth fell to 9.5% in September from 13.1% in August, according to the Office for National Statistics.
In October last year, the zero rate band returned to its previous level of £125,000 from £250,000 after the government increased tax relief on purchases in order to support the market during Covid-19.
This means the £2,500 stamp duty cap that homebuyers enjoyed between July and September 2021 has been removed. Previously, they were able to save up to £15,000 between July 2020 and the end of June 2021.
However, while home prices remain supported by a lack of homes coming to market, many expect to see prices fall over the next year in the face of rising mortgage rates and tough economic conditions.
October CPI inflation rose to 11.1 percent, above expectations of around 10.7 percent, adding pressure to household finances.
Moreover, while mortgage rates are starting to fall, they are still much higher than they were earlier in the year.
Before the Friday, Sept. 23 mini budget, the average two-year fixed interest rate across all loan-to-value categories was 4.74 percent, and the five-year fix was 4.75 percent, according to Moneyfacts.
The rates held steady at 6.28 percent and 6.07 percent, respectively, as of November 14, after both fell slightly from a peak of 6.5 percent in October.
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Fixed rate mortgages have been declining since last month after they had risen sharply
Jeremy Leaf, North London estate agent and former RICS Chairman, says: ‘This most comprehensive of all the housing market surveys, although a little dated, confirms what we see at the sharp end.
Prices remain underpinned by inventory shortages as buyers seek to take advantage of competitive mortgage rates before the fallout from the scaled-down budget pushes them higher.
However, concerns about a further rise in inflation and potential impacts arising from the fall statement are contributing to a reduction in new business.
Nathan Emerson, CEO of estate agent industry body PropertyMark, added: “Things are changing, and our members are seeing a steady shift into a buyers market where the largest proportion of sales are now agreed upon at the asking price or lower.
“Demand continues to outpace supply and although buyers are negotiating more seriously with higher borrowing rates in mind, realistically priced homes are still selling.”
Real estate agency Savills predicted that house prices would fall 10 percent next year before rising 1 percent in 2024. As recently as May, the real estate agent predicted only a 1 percent drop in 2023, but the sharp increase in rates Subprime mortgages led to a gloomier outlook.
Rents are rising at about 4% per year
However, as housing prices fell, private rents paid by tenants in the UK increased by 3.8 percent in the 12 months to October 2022, according to separate data from the Office for National Statistics. The increase was up from 3.7 percent in the year through September.
The Residential Lettings Agents Association reports that demand for real estate is increasing, as are rental prices. The supply of homes available for rent has not increased in the past four months.
Private rents increased by 3.8% across the UK in the 12 months to October 2022
Niki Stephenson, managing director of the national estate agent group Fine & Country, said: “All eyes will now be on Chancellor Jeremy Hunt’s autumn statement which is expected to include both tax hikes and spending cuts.
Changes to capital gains tax provisions could have a negative impact on the buy-to-let sector at a time when many landlords are already moving out, and potential newcomers find the benefits no longer outweigh the uncertainty.
“The decline in the private rental sector means an exacerbation of the accommodation crisis across the regions and an increase in rents for tenants.”
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