Average UK house price now at £256,900, but demand begins to cool

Latest Zoopla report reveals that after house prices increased by £19,800, rising mortgage prices are starting take a toll on buyers…

David Hannah, Group Chairman at Cornerstone Tax, and Simon Bath, CEO of iPlace Global, the creators of Moveable, explain to ATV Today Lifestyle why the housing market is set for a cooldown.

David Hannah, Group Chairman at Cornerstone Tax:

“The problem we do have in the UK property market is the disparity between supply and demand. If builders are building and they’re over supplying, it will soften house prices and the appreciation in asset value. But, if the number of people wanting to buy houses continue to exceed the supply, then those prices will start to rise again. Unfortunately, the government’s target of 300,000 new homes a year has not been met, meaning this issue is unlikely to be resolved soon.

“Whilst I do believe the impact of rising interest rates will gradually start to affect prices, we also have an open market in the UK which means not only are domestic purchasers and investors looking to buy, but we also have inbound investors. This means that even if demand cools domestically, international buyers could contribute to keeping prices high.”

New research from real-estate firm, Zoopla, has revealed that despite increasing financial pressures, property prices are still on the rise. The average home now stands at £256,900, marking a £19,800 (8.3%) increase in the past 12 months alone, whilst the average first-time buyer property has shot up by £33,000 – to £269,000 – in the same period.

However, industry experts like Cornerstone Tax’s David Hannah and iPlace Global’s Simon Bath have stated that the demand for new homes is beginning to weaken as soaring inflation, alongside continuous rises in mortgage rates, begin to bite. With this in mind, Hannah and Bath explain why Britain could be set for a property market slowdown in the latter half of the year leading into the beginning of 2023.

First-time buyers continue to act as the biggest driving force in the housing market, accounting for 177,000 or 35% of all property transactions in the UK. However, soaring interest rates and mortgage prices could mean that they are also likely to be worst affected by these rises, with the average monthly mortgage payment up by 20% (£163) since the start of the year – now at £976 a month. Now, Zoopla has warned that first-time buyers on lower incomes, homeowners looking to trade up on their current home, and buyers specifically in the south east of England and London, could feel the greatest impact in affordability.

First-time buyers will also be further affected by rising interest rates – experts have warned that they could peak at 2.5% by the end of 2022. This means prospective homeowners will be faced with higher borrowing costs, and because of this, various mortgage lenders across the nation are now being forced to provide buyers with longer-term plans. Despite this, rising interest rates are still likely to have a knock on effect on the housing market and could result in a slower pace of growth or even drop in property prices.

Further to this, the latest figures from Rightmove also showed a 13% increase in the number of sellers last month, which has provided a much-needed injection of stock for prospective buyers. However, 53% of properties are still selling at or over their final advertised asking price and 98.9% of properties are achieving their final advertised asking price according to Rightmove. That being said, many sellers are still looking to lower their asking price to ensure that they can close deals by Christmas.

Simon Bath, CEO of iPlace Global, the creators of Moveable:

“The latest reports from Zoopla and Rightmove show clear signs that there could be a slowdown in housing market activity towards the end of the year. Although this is likely due to the fact that many people are currently on holidays, rising mortgage prices could also be a driving factor towards the drop in demand – particularly for first-time buyers, many who are really struggling to get onto the ladder in the current market conditions.

“It’s great that we are beginning to see an increase in the number of sellers, and we have proprietary research showing that almost a quarter of millennials are now looking to buy a home to develop, not to live in. Hopefully, this added stock can further help to put the brakes on rising prices over the next year, with less competition making it easier for first-time buyers to make their way onto the property ladder.

“However, the government must also ensure that they create new schemes to replace old ones like Help To Buy. With borrowing costs set to jump up even more, government assistance will be even more crucial to ensure that everyone gets the opportunity to step onto the proper ladder – even as prices continue to rise.”