House price growth in the UK is slowing...
The annual house price growth in the UK has dropped into single digits for the first time since October 2021. While that figure may seem alarming, it is important to know that house prices have remained stable, and the slowdown has been moderate. Here is what you need to know about house prices - and house price growth - in the UK.
Are house prices in the UK dropping?
While it would be a stretch to say that the UK housing market is stable, home prices have not yet dropped off substantially, according to a recent property report from the Nationwide Building Society. It is true that this is the first time in 14 months that property values have failed to increase, but Nationwide’s figure of £272,259 for September is roughly the same as it was in August.
And some areas of the country are showing strong rates of growth (although they could be considered outliers). In the South West, for instance, the average house price is £321,725, which represents an annual increase of 12.5%. The South West is followed closely by the East Midlands, where the average house price is £241,699, an annual increase of 12.3%.
The next highest growth is in Wales, where the average price of a home is £213,684, an increase of 12.1%. In terms of individual countries in the UK, Wales leads the pack in growth, with Northern Ireland seeing a 10.1% increase and Scotland experiencing a rise of 7.8%.
In other words, house price growth in the UK is slowing, but prices themselves have not dropped off—at least not yet. Robert Gardner, chief economist for Nationwide, cited the Truss government’s recent mini budget for delaying any decrease in home prices, noting that the cut in stamp duty is likely a contributing factor.
Annual house price growth: How serious is the current slowdown?
Annual house price growth in the UK has dropped into single digits—9.5%—for the first time since October 2021. While that figure may seem alarming, it is important to know that price growth has remained stable, and the slowdown has been moderate.
Nationwide, reporting a robust pace of increase, said its House Price Index for September 2022 showed that, when season effects are accounted for, prices were consistent throughout the month from August. That means that it was the first month since July 2021 that did not see a consecutive increase.
“There have been further signs of a slowdown in the market over the past month, with the number of mortgages approved for house purchase remaining below pre-pandemic levels and surveyors reporting a decline in new buyer enquiries,” Gardner said. “Nevertheless, the slowdown to date has been modest and, combined with a shortage of stock on the market, this has meant that price growth has remained firm.”
How does the annual house price growth break down by region?
In the third quarter of 2022, 10 of the UK’s 13 regions showed a softening in annual house price growth, according to Nationwide’s quarterly regional house price index. While the South West was the best performing region, the annual house price growth there dropped from 14.7% in Q2 to 12.5% in the last quarter. The East Midlands was close behind, seeing an annual price growth increase from 11.4% in Q2 to 12.3% in Q3.
Despite the South West’s strong performance, the growth overall in northern England was stronger than in southern England. And while London saw modest annual price growth from 6% in Q2 to 6.6% in Q3, it remained the weakest performing region in the UK.
Does the house price growth slowdown mean home prices will eventually fall?
Even though the quarterly growth rate of house prices is slowing, the average price in the UK has risen by 8.2% (£19,650) over the last 12 months, according to the property listing platform Zoopla. Zoopla’s House Price Index for September found there are no signs of an immediate dip in price inflation but did find there were signs of asking price reductions of 5% or more over the spring and summer. “The latest data shows that 6% of homes listed for sale have seen the asking price adjusted downwards,” said Richard Donnell, Zoopla’s research executive director.
While that figure represents the largest downward adjustments since before the COVID-19 pandemic, it is also common entering the autumn market. Zoopla also added that it represents a move from a white-hot sellers’ market into a buyer’s market rather than an indication of plummeting home prices.
