House prices rose 11.5% per year in August 2022, according to the latest report from Halifax.
The average UK house price hit a record £294,260, raising the rungs on the property ladder further out of reach for home buyers as the cost of living crisis continued to bite.
The figure represented a 0.4% rise month-on-month, recovering from a slight drop in July. However, the climb was a noted slowdown from the average monthly increase of 0.9% over the past 12 months.
Halifax confirmed annual house price growth had been easing gradually, after reaching 12.5% in June this year.
“The property market is looking relatively rosy, but that’s largely because we’re looking in the rear view mirror.” said Hargreaves Lansdown senior personal finance analyst Sarah Coles.
“Prices rose by double-digits again in August, to a new record high, and monthly price rises returned to positive growth again.”
London prices hit new record
The month saw the London property market hit its highest annual price rise in six years at 8.8%, with average prices soaring to a record £554,718.
“Wales saw annual price rises of 16.1% – which is something we haven’t seen in the region for 17 years. Even London, which has been a laggard for years, posted the highest price growth in six years,” said Coles.
Cost of living crisis signals market slowdown
“It looks like everything in the property market is rosy. But this reflects the market two or three months ago, because of the lag between sales being agreed and completions, and in the intervening months, the world has started to look a bit different.”
The housing market has long been marked for a slowdown, with the combined impact of rising interest rates and skyrocketing inflation expected to throw cold water on the red-hot market.
“Back in May, when interest rates were at 1%, talk of recession was much more subdued and while we had seen the energy price cap rise in April, future rises weren’t at the forefront of people’s minds,” said Coles.
“We had seen demand start to come off the boil, but the RICS report at the time highlighted that prices were still being driven up by a shortage of properties on the market.”
“Now the cost-of-living crisis has hit home, and while we may not be forced to face the full impact of rises in energy prices, we’re still having to cope with rampant inflation across the board. At a time of rising rates and higher house prices, this is going to push property out of reach for desperate buyers.”
However, the housing market decline will come as a bumpy ride, rather than a straightforward downward trajectory.
“As we go through the rest of the year. higher interest rates and runaway inflation are only going to make life harder,” said Coles.
“However, we won’t see annual house price rises fall in a straight line. This is partly because of the echoes of the stamp duty holiday last year which created really lumpy price changes a year ago.”
“However, it’s also because the property market is driven to a huge extent by sentiment, and right now, that’s a bit of a rollercoaster ride.”
