House prices continued to rise in August, Halifax says, but experts warn of a downturn

UK house prices rose in the year to August after falling in July, according to Halifax.

However, month-over-month house price inflation slowed to 11.5 percent, down from 11.8 percent in July.

The average house cost in the UK is now £294,260 according to the Bank’s latest House Price Index.

However, the annual growth rate for the year ending August 2022 slowed to a three-month low. Home prices rose during the second quarter by 2.6 percent.

Kim Kinnaird, Director, Halifax Mortgages, said: ‘While house prices have so far proven resilient in the face of growing economic uncertainty, industry surveys suggest the outlook is quiet across the majority of the UK, with buyer demand declining, and other things ahead. Research indicators also point to a possible slowdown in market activity.

First, there is significant damage to people’s incomes from the pressures of the cost of living.

“The 80 per cent rise in energy price caps for October will put more pressure on household finances, as will further increases expected in January and April.

“At expected levels, this is likely to limit the amounts that potential homebuyers can borrow, as well as the negative impact of higher energy prices on the broader economy.”

Even if the government steps in to lower energy bills, Kinnaird said borrowing costs will continue to increase as the Bank of England is expected to raise the base rate which will affect house prices.

“However, this should be seen in the context of the exceptional growth we have seen in recent years, with average house prices rising by more than £30,000 in the last 12 months alone,” she added.

Welsh homes add up to £31,000 a year

Regionally, Wales saw the strongest annual growth in the UK with house prices rising 16.1 per cent, adding £31,246 to prices over the past year. The median property now costs £224,858.

By contrast, London remains 8.8 per cent behind, having added £44,669 over the past 12 months to bring the average to £554,718.

Iain McKenzie, chief executive of The Guild of Property Professionals, said: ‘Home prices are back to business as usual after a small decline last month, but the growing signs that the market is cooling off cannot be ignored.

Demand is slowly declining across most of the country as high inflation and rising interest rates start to turn the screw on consumers and the economy.

As we have seen in the past, there is still demand during periods of economic turmoil, when about half of buyers are forced to relocate due to changing living conditions. This demand may keep prices high for the rest of the year.

Mark Harris, CEO of mortgage brokerage SPF Private Clients, said: “With markets betting on another hike in interest rates this month, the momentum continues for borrowers to move quickly to secure a competitive deal.

Lenders have money to lend and are eager to lend even though volume management is the name of the game.

There are still good deals to be made though as rising energy bills affect affordability calculations and lenders are expanding their policy for higher income households accordingly.

Louis Shaw, founder of Mansfield-based Shaw Financial Services, added: “August, as silly as it may sound, has been off the charts, with first-time buyers at the forefront. The volume of inquiries and calls we’re getting is still at record levels, which is starting to look a little strange given the cost of Living crisis and rising interest rates… The situation should become calmer, but we see the opposite.

With two years of rapid home price growth, it is as if the real estate market has detached from the economic train and is now moving freely on the tracks without any brakes. Let’s hope for a gradual slowdown rather than hitting barriers. The fact that we’re now seeing loans to prime borrowers above 5 percent may start to see a slight drop in demand leading to a slowdown rather than a crash.