December 2022: Strong employment rates and shortage of homes set to support property values

Wed 14 Dec 2022

The most recent House Price Index released by Halifax records a drop in annual house price growth of 0.1% in September, taking the annual rate to 9.9%. This compares with growth of 0.3% in August when the annual inflation rate stood at 11.4%. This is the third consecutive monthly fall in the growth rate and, they believe, a sign that the property market is slowing. In their October House Price Index, however, Rightmove reports a rise in asking prices of 0.9%. Their annual growth rate has fallen and now stands at 7.8%, compared with 8.7% the previous month. According to their figures, the average asking price of a home in the UK is now £371,158, whereas Halifax calculates the value to be considerably lower at £293,853. Rightmove’s figures show that 11 out of 12 UK regions saw slower growth in September than in August, with the exception of the North East.

London continues to experience the lowest annual growth, with a rate of 8.1%. In their HPI commentary, Halifax notes that house prices have been “largely flat” since June, well before the recent uncertainty in the UK economy, triggered by the now largely over-turned mini-budget.

Halifax believe that the current slower growth in the market must be seen in the context of the very high rate of growth experienced in recent years. Since the start of the pandemic, according to their figures, the average price of UK property has risen by 23%, meaning a typical UK home has increased in value by £55,000.

“In Harrow, there are 14,825 home owners in total. Of these 52% have a mortgage so will be affected by interest rate rises”

Tim Bannister, Rightmove’s Director of Property Science, comments that it will take time to see how the uncertainty in the mortgage market affects home movers. At the moment, it’s first-time buyers who are feeling the effects of a rapid rise in mortgage rates, with demand falling by 21% in the first two weeks after the mini-budget. However, demand is still buoyant (+24%) compared to the comparable pre-pandemic 2019 seasonal figure.

Rightmove points out, although the current market uncertainty accelerated the trend, demand had been beginning to soften due to the slow rise in mortgage rates since the end of last year.

Both Halifax and Rightmove believe that the uncertainty over interest rates, coupled with the cost-of-living crisis, will result in a slowdown in the UK housing market. However, they both predict that the strong employment market, the continuing shortage of homes for sale and the stamp duty cuts should act to underpin market activity to some extent.

In Harrow, there are 14,825 home owners in total. Of these 52% have a mortgage so will be affected by interest rate rises, however they will be shielded in the short term by the remaining fixed term of their mortgage. The severity of the pain depends on the scale of the rate rises, but also on the extent to which households have over-extended themselves to get the mortgage. The good news is that since the credit crunch in 2008, lenders have had to be more restrained in their lending multiples, so there should be some in-built protection against over extension. There are also 4,770 households who rent privately in the area who will likewise be affected by any increase in mortgage rates as increased buy-to-let mortgage payments are inevitably be passed on by their landlords.