House price growth slows, as households suffer income squeeze

The UK housing market has experienced the lowest rate of monthly price growth since December 2019, but it remains a seller’s market with overall demand much higher than the five-year average, the latest figures show.

The property market in the South West remains the most buoyant with the average property taking 19 days between listing and offer accepted – with Bristol, South Gloucestershire, Plymouth, Swindon and Exeter the fast-moving markets due to more stock and choice in these areas, according to the latest House Price Index from Zoopla, which was released this morning.

London continues to lag behind as the UK’s slowest moving market with time to sell currently at 35 days compared to 22 days nationally – however, this is still above the May five-year average of 50 days.

Despite Wales and London being at opposite ends when it comes to house price growth – 11.4% vs 3.9% – it equates to a similar increase in monetary terms, highlighting the disparity in regional house prices across the UK.

Average values in Wales are up by £32,000 over the last 24 months taking prices to an average of £192,500. This contrasts to £30,000 in London over the same period, with average house prices of £516,100.

Of the UK’s largest cities, Nottingham has the highest price growth at 10.4%, followed by Bournemouth at 10.2%. Nottingham has been among the top performers in terms of price growth for the last year, with the relative affordability in the city increasing its appeal, while the rise in prices in Bournemouth reflects the ongoing appetite for coastal living.

But the slowdown in the speed of agreeing a sale is expected to continue – with  demand for houses in the South West seeing the sharpest slow-down over the last month,- 16% for flats and -14% for houses.

With the cost of living continuing to bite, this is having a knock-on effect on the cost of borrowing. Buyers are facing average rates of 3.37% for a five-year fixed-rate homeloan now, compared to 2.64% in December on a £250,000 loan, with a 25% deposit – increasing the annual cost of a loan by more than £870.

What’s more, if five-year  mortgage rates continue to rise by more than another basis point, taking them to around 4.62% (levels last seen in April 2010), the annual cost of a mortgage repayment would climb by £2,500 compared to December 2021.

Gráinne Gilmore
Grainne Gilmore

Zoopla says that it does not necessarily expect house prices to fall in 2023, but it does think that buyers will become more price sensitive leading to fewer sales and lower price growth.

This is due to the number of homeowners on fixed-rate mortgages, which protect them against interest rate rises in the short to medium-term, the stress tests carried out on those loans,  and the healthy employment market.

Higher borrowing costs will start to impact new buyers and we can see from the number of sales agreed that while it has been a busy start to the year, the number of sales agreed down 13% compared to June 2021.

Although house prices may not be growing as fast as they were,  the rate of annual house price growth is steady. House prices are expected to ease back in the coming months to +3% by year end.

With this in mind, owners considering whether now is the right time to put their house on the market are urged to act now, according to Gráinne Gilmore, head of research at Zoopla.

She said: “Buyer demand is still strong in the housing market, but signals are emerging that the impetus may be easing, so those who want to make a move should investigate their options sooner rather than later. In addition, mortgage rates are likely to continue to climb, so locking into a rate shortly could save hundreds over the longer-term.

“There are many factors supporting the price growth seen since the start of the pandemic, not least the continued imbalance between demand and supply, but the increasing cost of living, increasing mortgage rates for buyers and cloudier economic outlook will act as a brake on house price growth through the rest of the year.”

Nick Leeming
Nick Leeming

Also reflecting on the latest property price data, Nick Leeming, chairman of Jackson-Stops, said: “It’s unsurprising to see the South West market going against the cooling tide. Our Exeter office saw a near 40% uplift in buyer enquiries in May, heavily outpacing the level of instructions there. This allowed some sellers to be more bullish in their requests – pushing up competitive bids and testing the agility of buyers for a quick move.”

He continued: “The slower pace of growth overall is a sign that economic headwinds are coming down the tracks. I think we’ll look back and note the first quarter of 2022 as the absolute pinnacle of post-pandemic related enthusiasm, with an incredible amount of pent-up momentum. But the trampling on shoulders amongst buyers that we’ve seen is unlikely to sustain.

“It’s now apparent that April will be looked back on as an inflection point of the market. We are already seeing many over-ambitious sellers coming back down to the realms of reality. The housing market frenzy has a chill in its spine, but not enough to curb continuing incremental growth entirely this year thanks to the laws of supply and demand.

“The summer market will likely be characteristic of a steadier future, as residential property data is fairly slow moving against wider economic risks. What we are seeing is more supply coming to the market in most regions, partly in the belief that house prices are peaking, but also to lock in the best mortgage rates as the era of ultra-cheap money comes to an end.”


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