Home price inflation slowed slightly in August, but remained in double digits, despite turbulent economic conditions, high inflation and subprime mortgages hurting buyers.
House prices rose 10 per cent in the year to August 2022, according to Nationwide’s latest index, easing from the 11 per cent property inflation rate recorded in July.
But despite a rapidly rising mortgage rate and large bills hamstrung borrowers, house prices continued to rise – jumping 0.8 per cent over the month to lift the cost of the median home from £271,209 to £273,751.
Get out of the boil? Home prices increased 10% in the year to August 2022, but that’s down from 11% in the year to July.
It was the thirteenth consecutive monthly increase and the average house price has risen by around £50,000 in two years.
Robert Gardner, chief economist at Nationwide, said the real estate market was still strong but some momentum was coming out of it.
He said: ‘There are signs that the housing market is losing some momentum, with surveyors reporting fewer new buyer inquiries in recent months and the number of mortgage approvals for home purchases falling below pre-pandemic levels.
“However, the slowdown to date has been modest, combined with a lack of inventory in the market, meaning that price growth has remained flat.”
Others expressed their amazement at the continued growth.
It’s frankly astonishing that annual home price growth remains in double digits, said Andrew Montlake, managing director of mortgage broker Coreco. However, with inflation and energy bills set to skyrocket to the stratosphere, and rates set to increase as well, the real estate market will soon be back to earth.
“The only constant in these times of extreme influx, of course, is a shortage of supplies and homes being built. An abject lack of good quality affordable housing will prop up prices even as we go through an unprecedented living crisis.
Home prices continue to rise, supported by a housing shortage and persistent demand.
Tom Bell, head of UK residential research at Knight Frank, says he doesn’t expect to see a “brink” movement in prices, although growth will continue to be in the low single digits, but warns that the political climate could weigh on prices. more.
Overseeing the economy under the new prime minister is now the main risk facing the real estate market. If the unemployment rate remains low, inflation remains relatively contained and we avoid the BoE’s prediction of a recession lasting more than a year, then prices should continue to rise modestly.
And while the slowdown may seem hopeful to potential first-time buyers, soaring prices have left the median home costing more than seven times earnings, well above the long-term average of 4.5 times.
The home price-to-earnings ratio continues to rise with prices now more than 7 times average earnings, well above the long-run average of 4.5.
Britain’s largest building community has also warned that rising energy costs will hit less energy-efficient homes more in the coming months.
Gardner noted that Ofgem’s price cap – which will increase by 80 per cent from October 1 – applies to the unit price charged to consumers, rather than the maximum bill a household can charge.
So while the average family is set to pay £3,549 a year, some costs will be higher.
Despite rising interest rates, house prices have continued to rise in the UK but there are signs the market may be slowing as mortgage approvals have fallen to pre-pandemic levels.
He added, “We looked at the effect of rising energy costs on average bills for properties with different energy efficiency ratings (as reported by energy performance certificates).
Currently (based on cap April 2022 price) the most energy efficient properties (those rated AC) pay £1,700 per annum, while the least efficient (those rated FG) typically see bills twice as high at £3,900 per annum”
Best mortgage rates and how to find them
Mortgage rates skyrocketed as the Bank of England’s base rate rose rapidly.
If you are looking to buy your first home, move or remortgage, or are a buy-to-let owner, it is important to get good mortgage advice from a broker who can help you find the best deal.
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