Perennial undersupply of property continues to keep prices high
UK average house prices increased by 12.8% over the year to May 2022, up from the 11.9% rise recorded in April, the latest house price data from the HM Land Registry (HMLR) has shown.
The average UK house price was £283,000 in May 2022, an increase of £32,000 from the average price in May 2021, and a hike of £3,000 from April 2022. On a non-seasonally adjusted basis, average house prices in the UK increased by 1.2% between April and May 2022 compared with an increase of 0.4% during the same period a year earlier.
When seasonally adjusted, average house prices increased by 0.9% between April and May 2022, following an increase of 0.4% in the previous month.
The Office for National Statistics noted that since the latter half of 2020, the UK’s average house price growth has been accelerating. This trend continued into 2021, and house price growth has remained strong since the start of 2022.
“The perennial undersupply of property plays a critical role in keeping prices high, and this is an issue that will take many, many years to tackle,” Paresh Raja, chief executive at Market Financial Solutions, said. “Moreover, we have seen throughout the pandemic that despite a great deal of uncertainty, house prices have risen. This is because many homebuyers and investors often seek out the security of bricks and mortar as an asset to own – a reflection of the long-term trend of property prices rising and rising.
“That is why we should not be too quick to predict a fall, but instead stay alert to the challenges at hand and focus on making informed, diligent decisions before any property investment.”
Anna Clare Harper, director of real estate technology platform IMMO, agreed that house prices are still booming due to shortages of supply.
“We have an acute shortage of properties for sale and for rent which are affordable, in places people want and need to live, and of good quality,” Harper pointed out. “The only way to resolve this is to encourage long-term, professional investors into the sector, to rectify the shortage of supply and resolve this backlog.”
Tomer Aboody, director of property lender MT Finance, said that with interest rates rising, along with inflation and house prices, first-time buyers and movers are facing even tougher conditions.
“Getting more properties on to the market is key,” he said. “A restructure of stamp duty might encourage potential sellers to enter the market knowing that the cost of moving, whether upsizing or downsizing, is lower, and therefore more affordable.”
Read more: What will happen to house prices for the rest of 2022?
Still, many industry experts believe that house price growth will slow down in the coming months.
“It’s inconceivable to think the housing market will remain unaffected by the current interest rate cycle, which is now firmly on an upwards trajectory,” Ross Boyd, founder of comparison platform Dashly.com, said. “The property market will cool throughout 2022 and in 2023.”
Andrew Montlake, managing director of mortgage broker Coreco, seconded Boyd’s point.
“Increased borrowing costs and the immense pressure on household finances, as seen with inflation hitting 9.4%, will almost certainly start to temper demand in the months ahead, which will see the rate of price growth slow,” he said.
Figures per country and region
The HMLR data showed that the average house price in Wales increased annually by 14.4% to a record £212,000, down from an annual increase of 15.4% in April 2022. The average house price in England, at £302,000, increased by 13.1% over the year to May 2022, up from an increase of 11.6% in the year to April 2022. Meanwhile, in Scotland, the average house price rose annually by 11.2% to £188,000, down from an increase of 14.7% in the year to April 2022.
For Northern Ireland, the average increased by 10.4% over the year to the first quarter of 2022. Northern Ireland remains the cheapest UK country in which to purchase a property, with the average house price at £165,000.
The South West was the region with the highest annual house price growth, with average prices increasing by 16.9% in the year to May 2022. This was up from a growth rate of 14.7% in April 2022.
The lowest annual house price growth was in London, where average prices increased by 8.2% over the year to May 2022, up from 6.9% in April 2022. ONS said that despite being the region with the lowest annual growth, London’s average house prices remain the most expensive of any region in the UK, with an average price of £526,000 in May 2022.
The North East continued to have the lowest average house price at £154,000.
